Shared ownership of land - Legal Information Institute · Dealings in common property 43 21 ... 7...

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E 31AS

Report 59

S h a r e d O w n e r s h i po f L a n d

November 1999Wellington, New Zealand

i i S H A R E D O W N E R S H I P O F L A N D

The Law Commission is an independent, publicly funded, centraladvisory body established by statute to undertake the systematic review,reform and development of the law of New Zealand. Its purpose is tohelp achieve law that is just, principled, and accessible, and thatreflects the heritage and aspirations of the peoples of New Zealand.

The Commissioners are:

The Honourable Justice Baragwanath – PresidentJudge Margaret LeeDF DugdaleDenese Henare onzm

Timothy Brewer ed

Paul Heath qc

The Executive Manager of the Law Commission is Bala BenjaminThe office of the Law Commission is at 89 The Terrace, WellingtonPostal address: PO Box 2590, Wellington 6001, New ZealandDocument Exchange Number: sp 23534Telephone: (04) 473–3453, Facsimile: (04) 471–0959Email: [email protected]: www.lawcom.govt.nz

Report/Law Commission, Wellington, 1999issn 0113–2334 isbn 1–877187–46–1This report may be cited as: nzlc r59Also published as Parliamentary Paper E 31AS

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C o n t e n t s

Para Page

Letter of transmittal v

Preface vii

1 INTRODUCTION 1

2 CROSS-LEASES 4The problems 8 4How we got into this situation 13 6Phasing out 15 7The mechanics of conversion from cross-lease tosubdivision 17 8The conversion application 19 9The cost of conversion 24 12The consequences of inaction 27 13Contests as to conversion terms 28 14Converting leasehold interests from cross-lease tounit title 29 15

3 UNIT TITLES 17Physical dimensions of units 30 17The need for a body corporate 35 18Unit entitlement 38 20Insurance 42 21Dealings in common property 43 21Recovery from defaulters 44 22Staged developments 49 24Heritage and like covenants 54 26Easements 55 27Body corporate rules 56 27

4 JOINTLY OWNED ACCESS LOTS 31

APPENDICESA Summary of recommendations 33B Draft statute and commentary 36C List of submitters 76

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12 November 1999

The Honourable the Minister of Justice

Dear Minister

I am pleased to submit to you Report 59 of the Law Commission,Shared Ownership of Land.

Yours sincerely

The Hon Justice BaragwanathPresident

v i S H A R E D O W N E R S H I P O F L A N D

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P r e f a c e

THIS REPORT WAS PRECEDED in January 1999 by a discussion paper (NZLC PP35) which was widely distributed. Its proposals

for the phasing out of cross-leases received reasonably prominentmedia attention. There were about 40 submissions received froma variety of individuals and organisations. Appendix C is a listof those who made submissions. That list contains all thegovernment entities and non-governmental organisations thatmight have been expected to wish to be heard on our proposals.The Law Commission is confident that it has amply performedits obligation to seek public comment and to consult interestedparties.

This report has the same general structure as the preliminarypaper, but some of the proposals in the earlier publication havebeen modified and others abandoned entirely in the light of pointsmade to us in the submissions. One matter of understandableconcern to many was the cost implications of the mandatoryconversion of cross-leases that we proposed, and this reportdiscusses in much greater detail than its predecessor both proposalsto keep these costs to a minimum and our assessment of the likelyscenario should there be no reform, as buildings at some notprecisely foreseeable time in the future approach the end of theirlives. There is much to be said for a stitch in time.

We were assisted in preparing this report by the same committeeof experts that helped us with the discussion paper, namely:

JP Greenwood Chapman Tripp Sheffield Young,Wellington

TA Jones Glaister Ennor, AucklandDW McMorland Barrister, AucklandGJ Shanahan Rudd Watts & Stone, AucklandR Thomas Barrister, AucklandJE Toomey University of Canterbury

Virtually all the submissions we received were thoughtful andconstructive. We were particularly assisted by the help given bythe following:

JM GunmanAlan Parkin and Roger Poole of Housing New Zealand

viii S H A R E D O W N E R S H I P O F L A N D

Bruce Manners, MD Morris and Bruce Purdie of the NewZealand Institute of SurveyorsRichard Cross

Ultimate responsibility for any inadequacies in the finished productis of course that of the Commission rather than any of thosewhose contribution we have acknowledged.

The draft statute has been drafted by V Wilson formerly ofParliamentary Counsel Office and now an associate in theWellington office of Simpson Grierson. M Leaf was the LegalResearch officer who worked on this project and DF Dugdalewas the Commissioner in charge of the project.

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1I n t r o d u c t i o n

1 THE NOT ENTIRELY PRECISE TERM “shared ownership” employed in the title to this report is intended to refer to the various

methods by which proprietary or quasi-proprietary rights todefined parts of a single allotment of land and the structuresthereon can be held by different persons. In New Zealand legislatorswere slow to respond to public demand for two particular typesof landholding. One was the separate ownership of horizontallysubdivided parts of a building of more than one storey whichwhile always theoretically possible was never commerciallyattractive because of the complexity of the necessary ancillaryeasements. The other was the concentration of a number ofdwellings (detached or not) on a single lot, in preference to arequirement that every separately owned home should besurrounded by its own curtilage of 32 to 40 perches. One of theconcerns of this report is the legacy of the ingenious schemesdevised by conveyancers to fill the void resulting from the absenceof appropriate statutory provision to satisfy such market demands.

2 An early solution was the flat- or office-owning company in whichthe “owner” of each part of a building in fact owned a parcel ofshares which carried with it the benefit of a lease or licenceentitling exclusive occupancy of such part. This device wasrecognised by the Companies Amendment Act 1964 which, amongother things, permitted the registration of such licences underthe Land Transfer Act 1952. There was a hiccup when in Jenkinsv Harbour View Courts Limited [1966] NZLR 1 the Court of Appealruled that leases or licences granted under such an arrangementwere void as constituting a return of capital. To avoid theinconvenience of this result there was hastily enacted theCompanies Amendment Act (No 2) 1965. The provisions firstenacted as Part I of the Companies Amendment Act 1964 havebeen substantially re-enacted as Part VIIA of the Land TransferAct 1952. Despite the provision for registration such licencestend not to be regarded by lenders as attractive securities.

3 The reason for the existence of flat- and office-owning companieseffectively ceased with the enactment of the Unit Titles Act 1972.However, there seems no good reason to disturb flat- and office-

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owning companies already in existence. Some people owning flatsby this particular method are attracted by the power that can beconferred by the provisions of the constitution of a company togive other flat-owners absolute control as to who is to be permittedto buy or lease flats. Flat-holders are in this way able to excludea new occupant whom they regard as unsuitable. (We receivedseparate submissions from two shareholders in one Auckland flat-owning company suggesting, in effect, that the company had falleninto the hands of a coterie that abuses this and other powers.The suggestion made was that a flat-owning company should beobliged to convert to a unit title scheme if the company failedeach year to pass a members’ resolution positively favouringpreservation of the company lease arrangement. Even assumingthat the complaints in these two submissions are justified andthat existing Companies Act machinery is inadequate to sortsuch matters out (issues which it is not the Law Commission’sfunction to determine), the Commission does not favour changingthe general law to solve problems that have arisen in this singleinstance.) But we think that no more such schemes should becreated and this, judging from submissions received, seems to bethe general view. Machinery already exists in the Unit TitlesAct 1972 Part IV for the voluntary conversion of company leaseschemes to unit title schemes. The merits of conversion arediscussed in Geddes v Devon Park Town Houses Limited [1977] 1NZLR 53.

4 The Municipal Corporations Amendment Act 1958 section 3(2)and the Land Subdivision in Counties Amendment Act 1958section 2(2) provided that a lease of part of a building was not asubdivision of land. It was in reliance on this change in the lawthat the cross-lease system of “owning” flats was devised. Eachcross-lease owner owns a lease (usually for 999 years) of a flattogether with an undivided interest as tenant in common in equalshares with the other cross-lease owners of the entire allotment.

5 The passing of time brought refinements to the scheme. DistrictLand Registrars are prepared to issue a composite certificate oftitle including both the leasehold interest and the undivided sharein the allotment. The practice has evolved of each lessee beinggranted an area that the other lessees are excluded from using bya restrictive covenant. The effect of the Municipal CorporationsAmendment Act 1971 section 35 and the Counties AmendmentAct 1971 section 37 was to enable cross-leases of separate buildingson the same lot. Among other things, this has greatly facilitatedthe spread of “infill” housing, that is to say the erection and

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disposition of new detached residences built on parts (usuallythe former back gardens) of residential lots. Statistics are notkept of the number of cross-lease developments nationwide, butwe have been told by Auckland City that in its area there aresome 39 000 individual flats that are owned within about 15 000cross-lease arrangements.

6 Despite these improvements the cross-lease scheme is (for reasonsparticularised in chapter 2) irremediably flawed. In theCommission’s view the policy objective should be the replacementof cross-leases either by subdivisions or by unit titles.

7 Under the Unit Titles Act 1972 a statutory code was establishedenabling ownership, in the strict sense, of strata estates inresidences and business premises. Common property (driveways,stairwells and the like) is held by proprietors in shares definedas later discussed. There is a body corporate in which all theproprietors are the corporators with obligations that include thepayment of rates and other outgoings, the maintenance of commonproperty, and the levying of proprietors to procure the fundsnecessary for these purposes. In the view of the Commission,this scheme, admirable though it is, needs refining in the lightof experience of its operation which includes its use in contexts(mixed multi-purpose developments, for example) not foreseenby those who devised it.

INTRODUCTION


2C r o s s - l e a s e s

THE PROBLEMS

8 THE BASIC PROBLEM with the cross-lease system is perhaps public lack of awareness that there are problems. Here is one valuer’s

anecdote:

My firm was recently involved in the valuation of a cross-lease unit(1 of 2) where the owner of the rear flat had happily installed asubstantial swimming pool, barbeque and pool surrounds ($15,000)on the common ground. The owner of the front unit would be quitewithin his rights to spend his leisure time in the pool and cook SundayBrunch on the barbeque!! (KB Garland (1986) 31 New ZealandSurveyor 343).

Most cross-lease owners, it may be suspected, think of themselvesas owning their flats plus so much of the surrounding land asthey may occupy to the exclusion of other cross-lease owners(whether such exclusion rests on courtesy or custom or the rathersounder basis of a restrictive covenant). They may have beentold by the kindly real estate agent on whose recommendationthey bound themselves to their purchase that they would be “asgood as” owners. But of course they are in fact neither ownersnor as good as owners. To date the number of occasions on whichdifferences resulting from this have led to litigation is not great.Common sense suggests, however, that with the passing of timeand as buildings age or uses permitted in particular neighbourhoodschange, the essentially unsatisfactory nature of this form of tenurewill become more and more apparent. (The sorts of problemsthat can arise are exemplified by the case of Hopper NomineesLtd v White and Dryden, (28 February 1997) unreported, HighCourt, Auckland, CP 199/94, discussed by DW McMorland in(1997) 7 BCB 276. In that case, a two flat cross-lease schemehad been surrounded by the spread of a suburban shopping area.A, in breach of its lease, had removed the flat and garage ofwhich it was the cross-lease owner. B, in breach of its lease, wasusing the other flat for commercial purposes. A and B had beenunable to agree on what their respective rights were. Williams J

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indicated that the Court would order sale of the land on A’sapplication, but that apportionment of the proceeds would reflectthe greater value of B’s entitlement.)

9 Under the cross-lease scheme the rights of the cross-lease ownerdepend not on settled legal rules but on the terms of the particularlease. One important difference between a lease and a freeholdtitle is that a lease is susceptible of termination by re-entry forbreach of its terms. The terms will have been settled by thedeveloper (who may have been happy to take his money andrun), and often in practice are found to be unsuitable or inept.The purchaser further down the line is unable to negotiate withthe vendor for a variation of terms because this would necessitatethe agreement of the other cross-lease owners; the purchaser musttake the lease or leave it. Not infrequently the cross-lease methodwill have been used in situations (usually a large number of flats)where it is excessively cumbrous for the circumstances. Manycovenants in cross-leases are drafted as personal covenants anddo not pass the test at common law of “touching and concerningthe land”. The consequence is that they do not run with theland so as to bind successors. Clauses conferring power of attorneyare an example.

10 At best, the lease is only of the original building site. Unless anew flat plan has been deposited and new leases registered, across-lease owner has no lease of any horizontal addition, forexample, a conservatory or a carport. We say “at best” becausesome leases are of only the original building or part of it, as distinctfrom the building site. Some deposited flat plans are endorsed“Boundaries of areas to be leased are the external faces of exteriorwalls (structures, roofs) unless otherwise shown”. In these caseswhat we have said of horizontal additions applies also to verticaladditions. When the cross-lease owner comes to sell, the existenceof such additions is a defect in title. The defect can be remediedonly by the expensive process (which requires the co-operationof all the other cross-lease owners in the development) ofcancelling the lease and replacing it by a lease that includes theaddition. A general lack of awareness that this is the legal positionleads quite innocent vendors into trouble. The problem issufficiently widespread to have led to a change to the standardprinted form of agreement for sale and purchase. This changedoes no more than regulate as between vendor and purchaserthe consequences of such defects in title. It does nothing to solvethe underlying problem. (See form of agreement for sale andpurchase of real estate settled by the Real Estate Institute of New

CROSS-LEASES


Zealand Incorporated and the Auckland District Law SocietySeventh Edition July 1999 clauses 5.3 and 7.3.)

11 The position where the underlying title is itself leasehold is evenmore hazardous. Each cross-lease owner is liable to the head lessorfor all the rent due under the headlease (Hawkes Bay RegionalCouncil v Plested [1994] 2 NZLR 1, 7). The lease of the flat hasto be for a shorter term than the headlease and renewed on expiryof the headlease.

12 The physical or economic life of a flat is of course likely to be farshorter than 999 years. Different buildings on the same lot mayhave different life expectancies. This will usually be so where anew “infill” house is built on the same lot as an existing olderdwelling. There is no machinery for resolving differences as towhether or not a cross-lease scheme should be terminated, thisbeing often the only sensible solution if one flat has reached theend of its economic life. A single cross-lease owner would beable to prevent this.

HOW WE GOT INTO THIS SITUATION

13 The origin of the cross-lease system was as a means of exploitinga loophole in the rules restricting subdivision of land. It is notsurprising that the use of legal machinery designed for one purposecauses problems when used for a different purpose. Whatever thesocial or resource management objectives intended by a prohibitionon subdivisions in circumstances where cross-leases are resortedto, they have been frustrated. There is no physical difference,and therefore no genuine difference from a town planning pointof view, between cross-leasing and a straightforward subdivision.So the sensible course is to substitute for cross-leases eithersubdivision or, if that is inappropriate (for example, in the caseof flats in a building of more than one storey), unit titles. Thereis no reason why territorial local authorities should not exactprecisely the same requirements whether the tenure is freeholdor cross-lease. Many of them already do so and all of them shouldbe encouraged to do so. Examples of remaining differences, difficultto justify on any logical ground given the absence of physicaldifference between subdivision by way of cross-lease and any othertype of subdivision, are that density of development may bedetermined by the area of the total allotment ignoring internalexclusive use boundaries, daylight controls may similarly beimposed by reference to the perimeter boundary not internalboundaries, and provisions as to reserve fund contribution andfor sewerage and storm water reticulation may differ.

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14 In the view of the Commission cross-leases should be phased outand replaced by subdivision or unit title. Later in this report wepropose provisions under which, in certain circumstances, a bodycorporate can under the Unit Titles Act be dispensed with. Thisshould make conversion of a cross-lease scheme to unit titles inthose circumstances more acceptable. Whereas in the case ofcompany leases it is sufficient to forbid the creation of new schemes,in the case of cross-leases the Commission believes there shouldalso be a positive programme of conversion, either to subdivisionor to a unit title scheme. In our discussion paper (para 15) wesuggested that what is needed is:

(a) the voluntary conversion of cross-lease schemes to subdivisions;

(b) the prohibition of new cross-lease or company lease schemes; and

(c) the mandatory conversion of cross-lease schemes to unit titleschemes or subdivisions. (Part IV of the Unit Titles Act 1972already contains machinery for the voluntary conversion ofcompany lease and cross-lease schemes to unit title schemes.)

PHASING OUT

15 Of these three objectives there was widespread support insubmissions to us for the first: the immediate prohibition of newcross-lease schemes. The Real Estate Institute of New ZealandIncorporated, the Auckland City Council, and the Property &Land Economy Institute of New Zealand Incorporated all supportthat proposal. The New Zealand Institute of Surveyors believesthat “it would be a sensible course to phase out cross-leaseownership in favour of fee simple subdivisions or Unit Titles”.Local Government New Zealand says “We acknowledge that cross-leases have created some problems and ideally, no more shouldbe created.” We are told by the New Zealand Law Society thatwhile about 50 per cent of legal practitioners strongly favour anend to cross-leases and that “They believe that any attempt tointroduce legislation to cure defects is not a realistic option, and,if achieved, would merely prolong a form of ownership which isartificial and confusing”, other practitioners take a contrary view.Housing New Zealand supports the phasing out of the cross-leasetitle system over a 10 year period.

16 There was of course no objection to proposal (b): the voluntaryconversion of cross-lease schemes. There was however criticismof proposal (c): mandatory conversion. One argument advancedwas that those holding under cross-lease schemes see as an advantagethe regulation that is possible under such a scheme of the behaviour

CROSS-LEASES


of neighbours living in very close proximity. This contention seemsover-sophisticated. We very much doubt whether the overwhelmingmajority of those acquiring cross-leases look at the matter thisway. If this is wrong and it is genuinely important to a cross-leaseowner that the leases comprising a particular scheme forbid (say)more than one budgerigar per flat, it is always possible to providefor that prohibition by means of a restrictive covenant or (in thecase of unit titling) under body corporate rules under the conversionprocess we propose. (Any reader minded to dismiss as frivolousthe reference in this context to a domestic pet is referred to thefinal bullet point in paragraph 58.) A far more common argumentopposing the reform proposed was the cost of conversion, particularlyas it may affect older people of modest means. This importantquestion of the cost of mandatory conversion we discuss below.We propose that the objective of mandatory conversion be achievedindirectly by a prohibition after the mandatory conversion dateof the registration of any dealing affecting a cross-lease other thana transmission or vesting order. The intended consequence of thiswould be that to enable any other dealing to be registered thecross-lease owners will need to convert the cross-lease scheme toa subdivision or a unit title scheme.

THE MECHANICS OF CONVERSION FROMCROSS-LEASE TO SUBDIVISION

17 In no case would we expect there to be a need to redefine theexternal boundaries of the previous existing allotment. Theremay well be cases where the definition of internal boundaries onthe existing cross-lease flat plan is sufficiently precise to enablethe Registrar, after consultation with the Chief Surveyor, todispense with the deposit of a new plan of definition pursuant tothe proviso to the Land Transfer Act 1952 section 167(1). Weare told that in Auckland, but not everywhere else, for a decadeor so all cross-lease flat plans were accompanied by a survey sheetwhich demonstrated accurately the fixing of building positionsrelative to allotment boundaries but that this practice wasabandoned on the coming into force, on 1 May 1999, of the lessdemanding requirements of the National Cadastral SurveyGuidelines necessitated by the Survey Regulations 1998 (SR 1998/441). We are told that although the position varies from Registryto Registry, in many cases covenant boundaries have beenaccurately defined. We would expect that in most cases a plan ofdefinition will need to be deposited to define the boundaries ofthe newly created allotments.

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18 Because of the costs associated with this we considered otheroptions:

• Under section 167(2) a District Land Registrar may in hisdiscretion in cases of hardship dispense with the deposit of aplan and issue a title “Limited as to Parcels”, that is, with theboundaries not guaranteed. The hardship referred to is, however,confined to hardship linked to the value of the land. In ourpreliminary paper we rejected, as a solution to the problem ofthe cost of surveying, the issue of titles limited as to parcels inevery case on the basis that this would merely postpone theneed to incur survey costs. This view was generally accepted bythose who made submissions. It was submitted to us by a seniorChristchurch conveyancer that the market would eventuallyforce the registered proprietors of such titles to take thenecessary action to have full titles issued. It depends of courseon what is meant by “eventually”. There are, the New ZealandInstitute of Surveyors pointed out to us, still dealings withlimited titles 75 years after the Land Transfer (CompulsoryRegistration of Titles) Act 1924 came into force. The analogyis no doubt, by reason of the more rapid turnover of residentialthan other properties, less than perfect. The matter is one onwhich opinions may legitimately differ, but in the Commission’sview the integrity of the Register, which is too precious to bejeopardised, prevents the adoption as a general solution of theissue of titles limited as to parcels.

• We gave particular consideration to a paper Flathold: A NewEstate in Land (Department of Justice, Wellington, 1989) byMr Bryan Hayes, the then Registrar-General of Land, whichshares with this report the objective of doing away with domesticcross-leasing, but proposes as a solution the creation of a newestate in land. In the end we decided that the precise solutionproposed by Mr Hayes added an unnecessary complication tothe law. We have, however, been assisted in arriving at therecommendations we do make in this report by our reading ofMr Hayes’ paper and by the depth of experience and knowledgeon which it is founded.

THE CONVERSION APPLICATION

19 The procedure which we propose for converting a cross-leasescheme to a subdivision, where all interested parties are inagreement, is the lodging of an application with the Registrarsigned by the parties setting out what has been agreed as to

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1 0 S H A R E D O W N E R S H I P O F L A N D

ownership of lots, easements and restrictive covenants, by areference to a plan of definition under section 167 deposited forthe purpose or to any substitute accepted by the Registrar. Thelegislation should provide that consent to the conversion by anyperson other than the cross-lease owners is not needed, and thatupon issue of the new certificate of title the title should be subjectto any existing registered interest to be noted on the certificateof title in such a manner as to preserve its priority. The situationwhere there is a material difference between encumbrancesregistered against the land and those registered against the cross-lease will rarely be encountered but is possible (as the case ofHarman & Co Solicitor Nominee Company v Secureland MortgageInvestment Nominees Limited [1992] 2 NZLR 416 demonstrates).In the overwhelming majority of cases, the Registrar can beexpected to encounter no difficulty in determining priorities,following what is in effect a statutorily authorised merger of thelessors’ and lessees’ interests. In the very rare case where he is indoubt, the Registrar can protect the position by lodging a caveatunder section 211(d).

20 In our Preliminary Paper (para 15) we said:

The legislation must make it clear that territorial local authorities arenot to have the right to thwart either voluntary or mandatoryconversion by the subdivisional requirements of the ResourceManagement Act 1991. This would include any requirement for theupgrading of affected buildings of the sort contemplated by theResource Management Act 1991 section 224(f). It seems inappropriatefor a physical upgrading of a building to be required where no changein use or effective ownership is contemplated but merely a tidying upof the method of tenure.

The New Zealand Institute of Surveyors supported this view. Theysaid:

In terms of conversion of existing cross-leases there should not be arevisiting of the scheme by local authorities as the process will onlybe a change in the form of tenure and not a change in land use. Itshould only be processed by Land Information New Zealand and theLocal Authority does not need to know.

The Real Estate Institute of New Zealand Inc said:

The REINZ supports the contention of the Commission that TerritorialLocal Authorities should encourage conversion of cross-lease to unit-title or subdivisions and be prevented from thwarting this desirableobjective by invoking their powers under the Resource ManagementAct. It would be clearly inappropriate for them to require the physical

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upgrading of a building when there is no change in use, or effectiveownership, but merely the “tidying-up” of the method of tenure.

Local Government New Zealand said:

The Local Government sector is extremely concerned about theproposal that cross-leases become subdivisions without local authorityapproval. Local Authority approval is necessary to allow conditionsregarding rights of way, services/infrastructure and party walls,especially when the District Registrar is unlikely to police thesematters.

But the present mess is essentially the consequence of territoriallocal authorities making it easier for developers to cross-leasethan subdivide. If, in permitting cross-leases, the local authoritieshave failed to make proper provision for the matters listed byLocal Government New Zealand that is unfortunate, but thetidying up of the legal position that we propose should not beseized upon as an occasion to remedy such past blunders or levyfresh revenues or incur costs.

21 Auckland City advanced a number of reasons why a subdivisionconsent to the conversion under the Resource Management Actshould be required, of which probably the most cogent was aconcern for the integrity of the Council’s property database.Housing New Zealand suggested as a compromise that there be arequirement that territorial local authorities certify on any surveyplan to be deposited that “the boundaries defined on the planreflect the occupation of the site and/or the dimensioned covenantareas on the existing cross-lease plan”, observing “This mechanismwould give the [territorial local authority] the opportunity toupdate its records, could attract a nominal fee and should not beable to be withheld”. The Law Commission remains of the viewthat its original proposal was the correct one but to it could beadded a provision that a notice comparable to a notice of saleshould be given to the territorial local authority (see Rating PowersAct 1988 section 106).

22 We have considered various ways of keeping as low as possiblethe costs of the easements and restrictive covenants likely to beneeded in the case of many conversions. We considered, forexample, recommending the enactment of a schedule of standardterms for a party wall easement as a new part of the SeventhSchedule to the Land Transfer Act. In the end, however, theneater solution seemed to be to combine the approach of theUnit Titles Act 1972 section 11 with the requirement of a notationagainst the title of the sort to be found in the Local Government

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Act 1974 section 461. It will be open to the parties either aspart of the proposed section 121S application or subsequentlyeither to waive the rights conferred by this section (and thereforethe need for a memorial drawing attention to their existence) orto substitute for such general provisions a more precise formulation.A decision whether or not to adopt the last mentioned coursewill no doubt be governed to a large degree by the cost of a survey,which in most cases will be necessary to properly define theeasement. Our draft makes it clear that the Local GovernmentAct 1974 section 348 does not apply to any rights of way createdas part of the process.

23 It seems to us appropriate that no registry fees should be chargeablein respect of conversions. The Land Transfer Act 1952 section 170provides that the cost of corrective surveys should be borne bythe consolidated fund. There is a real sense in which the reformwe are proposing can be described as corrective. Successive statutesenabled de facto subdividing by cross-leasing. In enacting theUnit Titles Act 1972, the legislature failed to harken to proposalsthat the creation of further cross-leases be outlawed.

The “composite” certificate of title is a creature of district land registrarmade law; there appears to be no serious breach in principle of theLand Transfer Act but there is no express authority to issue suchcertificates of title. (Hayes, op cit pg 9, at para 4.4)

In all those circumstances it seems reasonable that the taxpayer,who will have to make up the registration fees not charged underour proposal, should make that modest contribution to the costsof conversion.

THE COST OF CONVERSION

24 The various cost-saving measures discussed to this point are:• dispensing with mortgagees’ and other consents;• dispensing with territorial local authority consents;• eliminating or reducing the cost of easements and restrictive

covenants; and• dispensing with registration fees.

This leaves an irreducible minimum of legal and surveying costs.As to that balance, we proposed in our preliminary paper a delaybefore compulsion bites. We said (paras 15–16):

Obviously it is desirable to avoid a situation in which pensioner unitholders are suddenly landed with the survey and legal costs necessaryto convert their form of tenure. We propose that objective (c) beachieved indirectly, by a prohibition after 10 years of the registration

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of any dealing affecting a cross-lease. (The view has been expressedthat a shorter period, say 5 years, would be preferable, and we invitecomment on that point.) . . . From the point of view of parties likelyto be affected by the financial imposition of converting a lease, itseems to us that this approach is workable. Unless the parties chooseto act sooner, in most cases conversion costs need not be incurreduntil after 10 years, and even then only on the occasion of theregistration of a dealing by any of the unit holders in the scheme.

25 Much of the concern that has been expressed to us has been theresult of one or two media reports (for example, an article in theTaupo Times on Friday 23 April 1999, which triggered a batch ofanxious letters from local readers) failing to make it clear thatwe were not proposing immediate expenditure. We think thatthe statute should provide for an Order in Council to fix thedate for mandatory conversion, such date to be not less than 10years after the royal assent to our proposed statute. This delaywill mean that:• a substantial proportion of affected leases will have been

acquired with notice of the pending obligation; and• where there has been no change of ownership between the date

of our statute and the appointed day, those affected will have aconsiderable period in which to make appropriate financialarrangements.

26 The urgent matter is stopping any more cross-leases. Our proposedrequirement of an Order in Council will enable the passing ofour proposed statute, while leaving it for the government of adecade hence to make the final decision as to when the provisionas to mandatory conversion should be brought into force in thelight of such matters as the then economic climate and the numberof voluntary conversions. An alternative method of allowing reformto proceed, while postponing the incurring of the survey costs,would be to permit the issue of titles limited as to parcels, butthis would not be a sensible solution partly for the reasons advancedin paragraph 18 and partly because such a solution would notwork if the appropriate conversion was to unit title.

THE CONSEQUENCES OF INACTION

27 It is important to be clear about the consequences of not graspingthe nettle of reform. Quite apart from the problems that mayarise during the life of the buildings, a time will arrive when theeconomic life of one or more of the dwellings forming part of aparticular scheme is at an end. If the dwellings have all beenbuilt at the same time they will probably have roughly the same

CROSS-LEASES


life expectancy; but a new infill house may, as already noted,still retain value when the original house is past repairing. Onemay guess that few, if any, of the cross-lease dwellings built since1971 will have a life in excess of 100 years, and at the morejerry-built end of the market their life can be expected to besubstantially less. What will be the position (given a lease ofonly the existing dwelling) of the owner of a cross-leased homethat is beyond economic repair? If all the buildings in a particularcomplex are in the same plight the owner may be able to persuadeall the other lessees to either join in a subdivision (which unlikeour proposals will involve jumping through whatever are the thenresource management hoops) or to surrender their leases and sellthe whole property en bloc. If there is no agreement as to this,the owner could conceivably erect a new dwelling occupying thesame footprint as the old if his lease included the land on whichthe building was erected and had provision for this (but it almostcertainly will not). A partition application might be a possibility,but this is likely to be very much more expensive than the proposalswe advance in this report. If these solutions are unavailable, hewill be left owning a lease of a dwelling which is unusable withoutuneconomic expenditure, which is unsaleable, and which by hislease he has probably covenanted to maintain and repair. Becausesuch an outcome will be readily foreseeable by any potentialpurchaser, the property will be likely to have been unmarketablefor some little time before reaching the beyond repair stage. It issurely better to try and sort out such potential problems now,than to shut one’s eyes to them.

CONTESTS AS TO CONVERSION TERMS

28 To this point we have been considering the mechanics ofconversion on the premise that all interested parties are inagreement. One effect of the requirement of mandatory conversionis that it becomes necessary to provide a mechanism to resolvedisputes among interested parties where it is proposed to convertcross-leases to freehold. Where it is proposed under the UnitTitles Act 1972 Part IV to convert cross-leases to titles underthat statute, there is a provision analogous to the one we proposein section 58 of that Act. There should be a provision to theeffect that any cross-lease owner should have the right to applyto a District Court to determine before the date appointed formandatory conversion whether there should be a conversion(taking into account among other things any financial hardshipto the opposing owners), and, if yes, the terms of such conversion;and a provision that any owner on or after the date appointed

15

for mandatory conversion may apply for an order settling theterms of conversion including any restrictive covenants.

The Unit Titles Act 1972 section 58 should be amended tosubstitute reference to a District Court for the High Court. Wewould expect the terms of conversion, in respect of whichdifferences could arise, to include the terms of any easementsand restrictive covenants not covered by our paragraph 19 proposaland the boundaries of the parcels of land to be vested in therespective flat holders, particularly where there are no formallydefined exclusive use areas. Even where there are formally definedrestrictive use areas, the fact that the normal sausage-flatconfiguration will give a larger parcel to the end units and thatparcels may have different economic values (if one or more butnot all provide space for future development, for example, or ifthe consequence of the dimensions of one or more but not allbeing that a use after subdivision will not conform with planningrequirements) may be a source of difference. The suggestion wasmade to us that the tribunal to which these applications couldbe made should be the Land Valuation Tribunal. Some applicationsmay well involve valuation issues, and the element of judicialspecialisation that would result from the proposal is attractive,but we decided in the end that there would not be enoughapplications on which valuation issues arise to make this a suitablesolution.

Our recommendation is therefore that jurisdiction should restin the District Court, but we hope that it is possible to provide aprocedure that is quick, efficient and informal and involves, wherepractical, specialist judges.

CONVERTING LEASEHOLD INTERESTS FROMCROSS-LEASE TO UNIT TITLE

29 Ground lessors are usually reluctant to agree to unit title schemesbecause the Unit Titles Act 1972 section 27 abolishes their rightof re-entry and for other reasons that have been expressed byJohn O’Regan as follows:

The most important starting point is that the lessor must consent tothe deposit of the unit plan (s 5(1)(f)). If acting for a lessor who hasbeen asked to give such consent, probably the best advice that onecan give is: don’t – for the following reasons –

(i) The lessor’s consent is not required to any future dealing with thestratum estate in leasehold including a transfer of the estate (s 24).

(ii) The liability of the original lessee and subsequent assignees prior

CROSS-LEASES


to deposit of the plan may be terminated on deposit of the plan –see New Zealand Railways Corporation v Body Corporate 64686(1990) 1 NZ ConvC 190, 500.

(iii) The effective lessee becomes the Body Corporate with a pro-rataguarantee by unit proprietors (in proportion to unit entitlement)(ss 23 and 26).

(iv) Rights of forfeiture, re-entry and distress are lost (s 27). As arather cumbersome alternative to those remedies, a lessor may,under section 28, apply for appointment of an administrator (aright which all creditors of the Body Corporate enjoy undersection 40) or for cancellation of the unit plan (again a remedyavailable to all creditors of the Body Corporate in terms ofsection 46).

(v) The lease does not expire on the date on which it says it is toexpire. Instead it continues until certain events occur as set outin section 29.

(John O’Regan and Rod Thomas Cross Leases and Unit Titles: Problems andSolutions: New Zealand Law Society Seminar Booklet

(Wellington, 1994) para 7.6(6).)

We think that Part IV of the Unit Titles Act 1972 should beamended to make it clear that the head lessor, despitesection 5(1)(f), does not have any veto on a transfer from cross-lease to unit title. As a quid pro quo we suggest that section 27do not apply to unit title schemes converted from cross-leaseschemes.

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3U n i t t i t l e s

PHYSICAL DIMENSIONS OF UNITS

30 THE TERM UNIT is defined in section 2 of the Unit Titles Act 1972 to mean the following:

unit, in relation to any land, means part of the land consisting of aspace of any shape situated below, on, or above the surface of theland, or partly in one such situation and partly in another or others,all the dimensions of which are limited, and that is designed forseparate ownership

On the basis of this definition the unit could be:• a polyhedron of space defined without reference to any building;• a polyhedron of space forming part of a building; or• a polyhedron of space which includes the whole or part of a

building.

Our preliminary paper discussed various provisions which had,or arguably had, the effect of carving down the breadth of thedefinition of “unit” in section 2. There was general agreementamong those who made submissions on this point that anyambiguity should be resolved. It is clear that the effect of requiringthe boundaries of the polyhedron to coincide with the physicallyascertainable parts of a building, would be that the owner of thepolyhedron would be deprived of one means of excludinginterference with his privacy and views and of extending hisbuilding without the complications attendant on redefining theshape of his polyhedron.

31 It is important to keep separate in one’s thinking what are threedistinct considerations:• what real property law should permit;• what resource management and other public health and welfare

considerations should prohibit; and• what should be regulated in the interests of consumer

protection.

32 On the first of these three points, there is no reason why as amatter of real property law (subject always to the practical need


for proper monumentation for identification purposes) polyhedronsnot bounded by either part of a building or the earth’s surfaceshould be prohibited. The second point was a matter of concernto the framers of the Unit Titles Act 1972, and explains suchprovisions as section 5(1)(g) (a troublesome provision amendedin 1973 and in 1979) and section 5A (added in 1979). Sincethen, however, there has been enacted the Resource ManagementAct 1990 which includes the deposit of a unit plan within itsPart X definition of “subdivision”. The effect of this and otherstatutes and delegated legislation is that polyhedrons definedwithout reference to buildings or the earth’s surface need not beprohibited by the Unit Titles Act for resource management orlike considerations because such considerations are regulated bythat other legislation.

33 As to consumer protection, the argument is that purchasers ofunits forming part of the early stages of a development are entitledto knowledge of what is intended in the later stages, but in thisrespect there is no essential difference between the purchasersof unit titles and the purchasers of lots in an ordinary subdivision.In either case, to the extent that future development is materialto such purchasers, they can stipulate for appropriate covenantsas a term of their contract of sale. We return to this issue inparagraph 52.

34 Our recommendation therefore is that the Unit Titles Act 1972should be amended to make it clear that no surface of a principalunit needs to be bounded by a building or the earth’s surface butthat such a unit may be wholly made up of open air space. (Itwill be necessary to return to this topic when we come to discussthe statutory provisions for staged development contained in PartI of the Unit Titles Amendment Act 1979.) As part of the reformproposed, the Unit Titles Act 1972 section 5(1)(g) and section 5Ashould be modified and R33(1) of the Survey Regulations 1998(SR 1998/441) should be revoked.

THE NEED FOR A BODY CORPORATE

35 In our preliminary paper we observed (para 24):

The requirement for body corporates typically operates efficiently andwell in the case of commercial premises and of residential premisesthat consist of a large number of units or are owned by commerciallysophisticated persons; in other cases body corporates are frequentlylittle understood and their existence ignored. This neglect can leadto problems when, for example, a unit holder wishes to sell and asection 36 certificate is requisitioned. In the view of the Commission,

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it would do no violence to the scheme of the statute to dispense witha body corporate in the case of very simple schemes. Eligible schemescan be defined as those with no common property other than drivewaysor party walls (thus only single storey projects would be included).

Our draft statute gives an extended definition of relevant commonproperty.

We also observed (para 25) that:

. . . the developments eligible to elect to operate without bodiescorporate will by definition be so small and simple that the compliancecosts of providing a body corporate are largely wasted and anyalternative machinery is unnecessary.

36 The submissions received broadly agreed that such a problem aswe suggested did exist. There was a suggestion that a perceptionof the requirement of a body corporate as an unnecessarycomplication and a continuing expense contributed to thereluctance to abandon cross-leases in favour of unit titles. Theconcerns expressed in the submissions we received in response toour suggestion of dispensing with body corporates in somecircumstances were these. First, it was suggested that the bodycorporate should be retained where the number of units exceedsfour. The Commission accepts that there is merit in a ceiling figurebut recommends that it be six. Housing New Zealand pointed outwith perfect logic that the developments we define as eligible fordispensation with a body corporate would be entirely suitable forsubdivision and that this would be a preferable alternative. Weagree, but subdivision raises the issue of cost already discussed inthe context of the conversion of cross-leases. We recommend thatthere be available in the simple cases with which we are concernedsubdivision on terms analogous to our proposal for cross-leases,but that retention of unit titles with elimination of the bodycorporate should be available as a cheaper alternative. Some concernwas expressed that abolition of the body corporate could leave anadministrative vacuum, and at the absence of a process to callthe body corporate back from the dead. These concerns are partlymet by our proposed ceiling in the number of units above whichthe body corporate may not be dispensed with. In practice, theabsence of formal administrative processes is not a problem incross-leased developments of comparable size. Moreover, it shouldnot be overlooked that as a last resort section 40, which providesfor the appointment of an administrator, is available. This section,contrary to our working paper proposal, should continue to apply,and will need some refinement to govern the situation where thereis no body corporate.

UNIT TITLES


37 The procedure we recommend for dispensing with a body corporatein the case of a new scheme or for the abolition of an existingbody corporate is to be found in section 16 of the draft statute inAppendix B.

UNIT ENTITLEMENT

38 Under section 6 the statute provides for the assignment to everyprincipal unit of a unit entitlement on the basis of the unit’svalue in relation to the other units. This entitlement is the basisof various determinations set out in section 6(3) and includes:the ownership of common property in section 9; the apportioningof levies among unit holders in section 15(2)(c); theapportionment of entitlement if a plan is cancelled insection 45(7); and voting rights in clause 27 of Schedule 2. Afundamental flaw in this scheme is that it makes one test do toomuch work. The basis of the entitlement on cancellation is notnecessarily an appropriate basis for apportioning liability for shareof outgoings. A lift, for example, may be of little or no use to aground floor owner. This fact may be highly relevant to theapportionment of outgoings but have no relevance to entitlementon cancellation of the plan or on voting rights.

39 Another flaw is that relative values may change during the lifeof the building. A view from a particular unit, for example, maybe built out. There may be zoning changes which allow groundfloor units to be used as shops or upper levels to be used as servicedresidential apartments or a hotel. A building that is only part ofthe polyhedron that comprises a principal unit, may be extendedhorizontally or vertically.

40 On the first of these points, section 33, relating to repairs andother works, already acknowledges that if the cost of such worksdoes not benefit all units equally, it should be apportionedaccording to actual benefit. There is, in practice, a difficulty indetermining whether particular expenditure is governed by thissection or by section 15(2)(c) which provides for a levying inproportion to unit entitlement. Section 37(5) permits varyingthe powers of the body corporate “other than those conferred orimposed by this Act” which of course includes section 15(2)(c).We think the solution to this part of the problem is a provisionallowing differential levies along the lines of section 33(a).

41 As to entitlement for voting purposes and on cancellation, thereshould be provision for varying the entitlement at any time before

21

cancellation by unanimous agreement. There should be furtherprovision for an application to the court by an aggrieved party ifother owners fail to accede to a proposal by him for reassessmentof the entitlement of his unit or that of another.

INSURANCE

42 In our preliminary paper (para 31) we wrote:

Section 15(1)(b) imposes on bodies corporate an obligation to insureall buildings and other improvements. It is not necessary or appropriatethat this obligation should apply to stand-alone buildings containedin a unit space. We recommend amending section 15 by insertingsubsection (2A)

(2A) Despite subsection (1)(b), the body corporate is not required toinsure and keep insured any building on the land that is a stand-alonebuilding contained in a unit space.

Although this proposal was supported by some who madesubmissions, others pointed out that in practice the effect onthe balance of units forming part of a complex of an unrepairedstand-alone building was such that the provision in section 38(3) –to the effect that every unit proprietor has an insurable interestin every other unit – was not just a statutory fiction but a plainstatement of fact. As put by the Property and Business LawCommittee of the Auckland District Law Society “who wantsthe dwelling next door to be burnt down and be under insured?”This point can, we think, be met by making our proposed provisiondependent on the unanimous agreement of all the proprietors.Our proposal will include provision for such a resolution in theSecond Schedule, which will be valuable for searching purposes.

DEALINGS IN COMMON PROPERTY

43 In our preliminary paper (para 32) we wrote:

Subsections 18(1) and 19(2) require the deposit of a new unit plan ifcommon property is transferred or acquired. This is unnecessarilycumbrous in the case of, for example, a boundary adjustment. Thesections should be modified to allow a dispensing power to the DistrictLand Registrar in appropriate cases . . .

We repeat that proposal. The intention is that the variation shouldbe properly noted in the supplementary record sheet. We make asimilar proposal in relation to minor adjustments between unitsnot involving any common property.

UNIT TITLES


RECOVERY FROM DEFAULTERS

44 The Commission expressed the received view of conveyancinglawyers when it observed in its discussion paper that there arepractical difficulties for body corporates in recovering levies fromunit holders who do not pay what is due from them. (See, forexample, O’Regan and Thomas, op cit pg 16, para 6.5(d).) Wesaid (para 33):

There is of course a clear right to sue but to do so is all too oftenuneconomic. If the unit holder does not pay that unit holder’s shareof a levy then to meet its outgoings the body corporate has to borrowthe money. Except for the interest provision in section 34A, there isat present no machinery for casting the cost of this on to the unitholder. As it stands, the only section under the Act imposing anysanction other than interest on the defaulting unit holder is theprovision in clause 28 of Schedule 2 depriving such a unit holder ofvoting rights. (Even here a unit holder cannot be excluded from votingwhen unanimous resolution is required.) This deprivation is not usuallymuch in the way of an incentive to payment where a unit holder issufficiently thick-skinned not to pay what is owing.

45 The Commission in its preliminary paper considered three solutionsto this problem. The first was to ensure that at least the bodycorporate will be paid if a dealing is registered against a particularunit. The way to do this is to require production to the Registrarof a section 36 certificate on registration of any dealing and toempower the body corporate to withhold such certificate if thereare arrears. It may be noted that the South African SectionalTitles Act (No 95) of 1986 section 15B(3)(a)(i)(aa) is acomparable provision. It has been held that the effective preferencethis confers on the body corporate can be fitted conceptuallyinto the statutory scheme of distribution among creditors of aninsolvent as a cost of realisation: Nel No v Body Corporate of theSeaways Building (1995) (1) SA 130. Appropriate provisions toeffect this are the following:

16A Certificate of proprietor’s liability to be produced to Registrar

No Registrar may enter a memorial on a certificate of title issued underthis Act if

(a) the memorial relates to a mortgage, charge, transfer, or otherdealing affecting the title; and

(b) a certificate under section 36 was not included with that mortgage,charge, transfer, or other dealing when the instrument waspresented for registration.

23

Amend section 36 by adding subsection (2):

(2) The body corporate may refuse to provide a certificate undersubsection (1) in respect of a proprietor if there are moneys duefrom that proprietor to the body corporate and those moneys areunpaid.

46 The second was to make first mortgagees liable for levies by analogywith the Rating Powers Act 1988 section 139. To achieve thiswe recommended a new section 15A be inserted into the UnitTitles Act:

15A Recovery of contributions from first mortgagee

(1) If a proprietor defaults in the payment of a contribution leviedunder section 15(2)(c), the body corporate may recover thatamount from any person who is a first mortgagee of the unit inrespect of which the amount is payable.

(2) If a first mortgagee pays a contribution under subsection (1), theamount so paid, until it is repaid to the mortgagee, must be treatedas forming part of the money secured by the mortgage and bearsinterest at the same rate, or, if the mortgagee so decides, isrecoverable by him or her from the mortgagor or proprietor.

47 The Commission also gave some thought to recommending theinsertion in the statute of a provision entitling the body corporateto exercise a power of sale in the event of a continuing default.An analogy is the power in Article 12 of Table A to the CompaniesAct 1955 for a company to sell shares over which it had a lien.There would need to be adequate provision for notice and othersafeguards comparable to the duties imposed on a mortgagee.

48 These proposed solutions were welcomed by some and viewedwith dubiety by others. It was said of the first that it was wrongto subject every transaction to the proposed procedure when aresult that was better (because it lacked the element of delay)was obtainable by the usual processes of judgment and of execution.It was said further, that it could mean that a proprietor in disputewith his body corporate but anxious to have a dealing finalisedcould be held to ransom. It was said (correctly) of the second,that it was incomplete because it did not extend to liabilitiesunder section 33 (relating to works not for the benefit of all unitsequally) and that in any event the liability was too open-endedfor the proposal to be fair. It was said of the third that it wasexcessively heavy-handed when measured against the amountslikely to be involved. We think that the problems are really just

UNIT TITLES


another unfortunate consequence of the unwise abandonmentin the District Courts Rules of the default summons procedurethat once provided a relatively swift and inexpensive method ofrecovering unpaid and uncontested debts. Our view is that it isimportant to pursue reform in the area of debt collection procedure.Since publication of our preliminary paper there has been decidedthe case of Godoy v Body Corporate No 164980 (14 June 1999)unreported, High Court, Auckland, M Nos 1904–1906/98. FisherJ in that case held that the effect of section 34 was to imposeliability on the proprietor for solicitor-and-client costs and otherconsequential expenses in circumstances analogous to non-payment of levies and amounts due under section 33. We weretold by one practitioner that even before this case courts if askedto do so have been in practice prepared to award to body corporatessolicitor-and-client costs (that is, complete costs incurred, notjust a proportion). It remains the case however that the bodycorporate has no security for moneys due. For this reason, in thisreport we endorse the first two proposals suggested in ourpreliminary paper and referred to above. If problems arise inpractice as a result of bodies corporate withholding section 36certificates from desperate sellers to procure payment of disputedamounts, we would expect such disputes to be susceptible of swiftresolution. The grant of an injunction requiring issue of thecertificate subject to the dispute moneys being paid to a stakeholderis one obvious solution.

STAGED DEVELOPMENTS

49 In our preliminary paper (para 37) we advanced certain proposalsin relation to Part I of the Unit Titles Amendment Act 1979 relatingto staged developments. We do not advance those proposals inthis paper, because it seems to us now (as it did to various partiesmaking submissions on our preliminary paper) that assuming theacceptance of our recommendations in relation to the definitionof units and in relation to unit entitlements, there has ceased tobe any reason for the existence of the present statutory provisionsfor staged developments. The present scheme is in various respectstroublesome. Section 5(5), by requiring strict adherence atsubsequent stages to a Proposed Unit Development Plan depositedat the outset, can by its inflexibility impose substantial costs. Ashas been said by John O’Regan (op cit pg 16, 89):

3.9 In practice, this has proved to be a particularly burdensome andcostly requirement. District Land Registrars have interpreted thewords “in any way” literally and there can be no criticism of them

25

for that. The rationale of the prohibition against change is thatthe purchaser of the first unit in a staged development shouldknow as much about the future environment into which he isbuying as will the purchaser of the final unit to be erected. Inpractice, surveyors find that they may need, particularly wheretopography plays an important part in the siting of dwellings orwhere excavation is required prior to the siting of a dwelling, toeffect slight changes to layout or location of a building. In largerdevelopments, this can cause developers immense problems, notso much in the production of a new proposed unit developmentplan, but in obtaining the consent of a veritable army of existingproprietors and mortgagees – not to mention their advisers whoseek, naturally, to be paid by the developer for their advice.

These problems can effectively diminish the advantages to thedeveloper of section 6(3) of the Unit Titles Amendment Act1979 which protects a developer against future changes to by-laws or to Resource Management Act requirements. It would befar more satisfactory if any variation to the original scheme weremonitored by the territorial local authority. In our view, no furtherstaged developments under Part I of the Unit Titles AmendmentAct 1979 should be permitted. There are better methods.

50 It seems to us that once it becomes clear that a unit may becomprised wholly of open air space and once flexibility in unitentitlements becomes permitted, it then becomes possible to devisea neater and simpler approach to staged developments than thatprovided by the 1979 amendment. Essentially our proposal is thata developer who (perhaps because he is undercapitalised, or becausehe wants to test the market for his product) wishes to proceed instages should be permitted to do so by subdividing the propertyto provide for the units it is desired to construct and sellimmediately and for a unit designated a “balance unit”. Whenhe is ready to do so he can proceed to deal with the balance unit.Our proposed amendment provides that a subdivision of thebalance unit (which is “a redevelopment” within the meaningof that term as defined) will not require the consent of theproprietors of the existing units despite section 44(4).

51 This arrangement, unlike the present law, will make the developerliable for his share of all outgoings.

52 It is said that the scheme provided by the 1979 amendment hasthe merit of providing a purchaser of an early unit with particularsof the balance of the development. (It should be noted that thepresent statutory provisions do not bind the developer as to whenthe balance of the work will be performed.) If the particulars of

UNIT TITLES


the balance of the development are important to an early buyer,such a buyer can stipulate for the appropriate provisions as amatter of contract. Such a buyer’s position is not essentiallydifferent, in this respect, from that of an early buyer of a lot inan ordinary subdivision. Examples of litigation in this class areKenneth Williams & Co Ltd v Thomas (1980) 1 NZ ConvC 190,583 (a subdivision) and McKearney v Holdsworth Group Ltd (9June 1999) unreported, High Court, Auckland, CP 433/98 (aunit bought off the plans).

53 The main benefit to developers in a staged development plan isthat under section 6 of the 1979 amendment approval for thewhole project remains valid despite the passage of time and anychanges to by-law or Resource Management Act requirements.This is the counterpart of the problem already discussed of thepolicing by the Registrar of departures from the original proposal.We think that in this respect too the mistake has been made ofconfusing what the law of real property should make provisionfor and the strictly extraneous question of Resource ManagementAct requirements. We may doubt whether the legislators of 1979contemplated the long lapses of time between consent andperformance that have in fact occurred. So O’Regan (op citpg 16, para 3.11) comments in 1994 that:

There are examples around the country of incomplete developmentscommenced in the heady days of the mid-1980’s and, since the “crash”on more or less permanent deferment.

The Resource Management Act 1991 has its own provisions asto duration of consents (sections 123–127) and there can be noreal warrant for departing from them.

HERITAGE AND LIKE COVENANTS

54 It has become not uncommon for people to use the Unit TitlesAct for arrangements where they join together to buy a place ofnatural beauty which is treated as part of the common property,while having unit titles in respect of homes erected on the property(tucked away in a stand of native bush for example). The legislationshould make it clear that:

(a) a heritage covenant pursuant to the Historic Places Act 1980section 6;

(b) an open space covenant pursuant to the Queen Elizabeth TheSecond National Trust Act 1977 section 22;

27

(c) an agreement declaring land to be protected private land pursuantto the Reserves Act 1977 section 76; and

(d) a covenant pursuant to the Reserves Act 1977 section 77.

are easements for the purposes of the Unit Titles Act 1972 section4(3A), section 7(1), section 9(3), and section 17, but not forthe purposes of section 45(5)(c).

EASEMENTS

55 Once a unit plan has been deposited, the effect of section 4(3)is that an easement may not be surrendered or varied. In O’Regan’swords (op cit pg 16, para 5.3) “Suspended animation by statutethus prevails”. We propose an amendment to allow, subject tothe appropriate consents, the variation or surrender of easementsappurtenant to the common property or to a particular unit.

BODY CORPORATE RULES

56 Section 37 and Schedules 2 and 3 provide rules: those set out inSchedule 2 may be added to, amended or repealed by unanimousresolution of the proprietors and not otherwise; those set out inSchedule 3 may be added to, amended or repealed by resolutionof the body corporate at a general meeting. In section 37(5)–(6), there are limitations with the broad purpose of ensuring thatthe basic proprietary entitlement of unit holders is not interferedwith and that body corporates stick to their knitting and do notengage in outside activities for profit. Section 42 provides thatin cases requiring unanimity, where unanimity has not beenachieved but a vote of 80 per cent in favour has been obtained,application may be made to the High Court to approve the changedespite the lack of unanimity. The 80 per cent threshold meansthat unless there are at least five units a single proprietor canthwart any attempt at change.

In Re Bell (22 October 1992) unreported, High Court, Wellington,M243/92, Jaine J suggested that the purpose of the section wasto prevent “the wishes of a large majority democraticallydetermined” being “thwarted by the views of a small minority”.In the Court’s view:

The merits of the matter are best determined by those who are affectedby it and have personal knowledge of it and after the matter has beenconsidered by them with the opportunity for debate at a properlyconvened meeting of the Body Corporate. It should not be for the

UNIT TITLES


Court to substitute its view on the merits of the proposal and thisCourt is not persuaded that the reasons for opposing the motions mustbe examined with a view to considering whether the minority viewon the merits of the proposal should be upheld with the result thatthe wishes of the majority could not be given effect to.

This approach to the application of section 42 would seemeffectively to reduce the requirement of unanimity to one of 80per cent support.

57 Section 43 entitles any member of an outvoted minority to seekrelief from the High Court. In Spencer-Inight v Johnston [1999] 3NZLR 103 Randerson J indicated that the appropriate approachto section 43 applications was as follows:

While the focus of the section is undoubtedly upon the effect of theact proposed upon the minority unit holder or holders and whether itwould be inequitable for that minority, the inquiry is not confinedsolely to the interests of the minority. All the circumstances of thecase are to be taken into account and, in my view, that enablesconsideration of a broad range of circumstances including the positionof the majority unit holder or holders. I accept the submission madeon behalf of the defendants that the task of the Court is to assess theeffects of the proposed act on an objective basis having regard to theestablished facts. The expression “inequitable” implies materialunfairness or injustice to the minority unit holder. Although I considerregard may be had to the fact that the minority unit holder/s will bedeemed to have been aware when acquiring their unit or units thatthey hold only a minority interest, such considerations could not bepermitted to become a dominant factor for otherwise the section wouldbe deprived of the remedial effect intended. Finally, it is clear thatthe Court retains a discretion to grant relief under the section evenwhere it is satisfied that the effect would be inequitable for theminority. The section does not give any guidance as to how suchdiscretion should be exercised and it is undesirable and unnecessaryto attempt to do so here. (p 106)

This approach was approved in Godoy v Body Corporate No 164980(14 June 1999) unreported, High Court, Auckland, M Nos 1904–1906 198. Fisher J in that case reformulated the test in the fol-lowing words:

Upon an application under s 43, the onus lies upon the complainingminority. In deciding whether a development would be inequitable toa minority, one is concerned with the interests of the majority as wellas the minority. All the circumstances of the case are to be taken intoaccount. The test is objective, but only in the sense that the minority’sown personal opinions and feelings as to alleged inequity are not inissue. The personal circumstances of the minority can be taken into

29

account in considering the impact upon their individual circumstances.In deciding whether a proposed rule change would be equitable, oneconsideration which could occasionally be helpful is to compare thenew rule with the way in which the statutory default rules in the ThirdSchedule to the Unit Titles Act would have impacted upon the samesituation. It is reasonable to assume that the default rules are notinequitable per se, although of course steps taken in reliance uponmore liberal rules in the meantime could make it inequitable to revertto something akin to the default rules. Finally, it may be noted thatthe Court has a discretion. Even where the Court concludes that theeffect of an act of a majority would be inequitable for the minority,the distinct phrase “and if the Court so orders” imports an overridingdiscretion whether to intervene.

58 In the light of certain requests contained in our preliminary paperfor expressions of opinion and the responses received, but alsoon the basis of recommendations from other sources, werecommend as follows:

• In our preliminary paper we asked “Should the requirement ofunanimity be replaced by a percentage and, if so, whatpercentage?” All of those who responded to this question wereof the view, with which we agree, that the fundamental natureof the Schedule II Rules makes a departure from unanimityinappropriate.

• We asked “Should the 80 per cent threshold for section 42applications be reduced and, if so, to what level?” It isrecommended that a section 42 application be able to be madewhere the resolution is supported by the owners of one of onlytwo principal units and in any other case where it is supportedon a poll by two-thirds of all possible votes.

• We asked whether the statute should contain some guidelinesfor the exercise of the section 42 discretion. The requirementof unanimity to vary the Schedule II rules is because of theirfundamental importance to the rights of unit holders. In lightof the “hands-off” approach of the High Court in Re Bell, thestatute should provide that a section 42 order should not bemade if the effect of the proposed resolution would be to change,so far as any opponent of the resolution is concerned, theessential elements of the scheme as they were when suchopponent contracted to acquire his or her interest.

• There should, out of abundant caution, be express power toestablish a sinking fund for deferred maintenance andreplacement items.

UNIT TITLES


• The issues that the High Court has to date been required todetermine under sections 42 and 43 are relatively minor. Godoy& Anor v Body Corporate No 164980 referred to in paragraph 57,for example, concerned amendment of a rule allowing “smalldomestic animals” to exclude all except small birds or goldfish,the amendment being opposed by the owners of a RhodesianRidgeback dog 22 inches high at the withers. These sectionsshould be altered to vest jurisdiction in the District Court or inan arbitrator if the parties so agree. Our earlier observations, inrelation to contested applications for conversion from cross-leasing, as to the need for a procedure that is quick, efficientand informal and involves specialist judges where practicalapplies similarly in the context of section 42 and 43applications.

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4J o i n t l y o w n e d a c c e s s l o t s

59 THERE ARE MANY OLDER SUBDIVISIONS where instead of access lots being apportioned among the properties they serve, with

each portion of the lot being subject to a right of way in favourof owners of the other portions, the method adopted has simplybeen for the owners of the rear lots to be co-owners of the completeaccess lot. This device seems to have returned to favour as aresult of the enactment in 1978 of the Local Government Act1974 section 279(2)(e) (now Resource Management Act 1991section 220(1)(b)(iv)) coupled with section 321(3)(c). We aretold that the change effected by these provisions was welcomedpartly because of the difficulties of portrayal of very narrow stripsparticularly when colour was abandoned in 1972 and partly becausethe cost of some pegging was avoided. If the machinery used hadbeen that of reciprocal rights of way, the rights implied bySchedule 9 of the Property Law Act 1952 would have beenapplicable. There is a need for a comparable provision in thecase of jointly owned access lots. Under the general law a co-owner has no right to contribution to the cost of repairs (Leigh vDickeson (1884) 15 QBD 60). To get around the problem theCommission recommends enacting the new sections 126H and126I of the Property Act 1952 to be found in our draft statute.In the draft section included in our discussion paper the definitionof access strip required provision of access to be the sole purposeof laying of the strip. Our present draft omits the word sole becausesuch strips are often used for such additional purpose as piping,water, gas and electricity. We have substituted the term “accesslots” for the term “access strips” used in our earlier draft to avoidconfusion with the Resource Management Act 1991 section 237Bwhich provides for “access strips” in a different context.

60 The proposal set out in the previous paragraph which was contained(but without the amendments we have referred to) in ourpreliminary paper was unanimously approved by those personsmaking submissions who commented on it. There were thosemaking submissions who wanted the provision to go further. Theysay that the present provisions of the Property Law Act 1952relating to rights of way needs strengthening; in particular, by


making express provision for an affected party or parties to takethe initiative to have works carried out, to provide some machineryfor determining what works are appropriate, and to resolve disputesalong much the same lines as the Fencing Act 1978. There isobvious merit in these proposals but they are outside the scopeof what we are trying to do in the present report, which is to sortout problems relating to shared ownership of land.

61 The Unit Titles Act 1972 section 5(1)(b) provides that a unittitle can be deposited only if it comprises all of the land in onetitle. An accidental consequence of this provision is that thatstatute is unavailable in relation to a lot the access to which iscomprised in a separate jointly owned access lot. There is noobvious reason why the provisions of the Unit Titles Act shouldnot be available in those circumstances and we propose anamendment to section 5(1)(b) to make this clear.

33

A P P E N D I X A

S u m m a r y o f r e c o m m e n d a t i o n s

A1 No further flat or office owning companies (within the meaningof the Land Transfer Act 1952 Part VIIA) should be permitted.

A2 No further cross-lease schemes should be permitted.

A3 There should be provision for voluntary conversion of cross-leaseschemes to subdivisions.

A4 After a date to be fixed by Order in Council not earlier than 10years after the royal assent to the proposed legislation (“themandatory date”), no instrument should be registered againstany cross-lease title, with the intended consequence that to enableany other dealing to be registered the scheme would need to beconverted to a subdivision or a unit title scheme.

A5 Until the mandatory date a District Court on the application ofany interested party should have power to direct either a conversionto subdivision or a conversion under the Unit titles Act 1972Part IV to unit titles.

A6 Any dispute as to the terms of a conversion should be resolvedby the District Court, and the Unit Titles Act 1972 section 58should be amended to give that Court the appropriate jurisdictionin the case of cross-lease to unit title conversions.

A7 The procedure for agreed cross-lease to subdivision conversionsshould be the lodging of an application with the Registrar signedby all interested parties. Such application should set out whatthe parties have agreed as to the ownership of lots, easements,and restrictive covenants, by a reference to a plan of definitionunder section 167 deposited for the purpose or to any substituteaccepted by the District Land Registrar.

A8 There should be a provision enabling the parties to elect to notprecisely define in such application easements and other ancillaryrights, but to rely on a broadly stated statutory entitlementanalogous to the Unit Titles Act 1972 section 11. If this electionis made, that fact must be noted against the new title.


A9 The consent of no person other than the cross-lease owners to aconversion should be needed.

A10 The entitlement of encumbrancers should be noted against mergedtitles in such a way as to preserve their priorities.

A11 The territorial local government must receive a notice of theconversion analogous to the notice of sale required by the RatingPowers Act 1988 section 106.

A12 If the title underlying a cross-lease scheme is itself leasehold andthe cross-lease scheme is converted to a unit title scheme, theUnit Titles Act section 27 shall not apply to such unit title scheme.

A13 There should be no Registry Office charge in relation toapplications.

A14 The Unit Titles Act 1972 section 2 should be amended to makeit clear that a unit may be wholly comprised of open air space.

A15 Where a Unit Titles Scheme comprises no more than six unitsand there is shown on the Unit Plan no common property otherthan driveways or party walls, in the case of existing schemesthe owners of all the units should have the right either to dispensewith the body corporate or to subdivide analogously to our proposalsfor cross-leases, and in the case of new schemes to dispense withthe body corporate.

A16 The Unit Titles Act 1972 should be amended:

(a) to permit, despite section 15(2)(c), differential levies on abasis analogous to the “substantially for the benefit” formulain section 33;

(b) to permit varying unit entitlements at any time beforecancellation by unanimous agreement or by the order of theCourt;

(c) to give power by unanimous resolution to remove theobligation on bodies corporate to insure stand-alone buildings;

(d) to permit, despite sections 18(1) and 19(2), minor variationsto the boundaries of the unit plan without deposit of a newunit plan subject to (with the consent of the Registrar)appropriate annotation of the supplementary record sheet, andto permit minor variations to the boundaries between unitswhere the proprietors of those units and any mortgagees agree;

(e) to require production of a section 36 certificate to the DistrictLand Registrar on registration of any dealing;

35

(f) to make first mortgagees liable for levies undersection 15(2)(c);

(g) to disallow future use of the staged development procedureprovided by the Unit Titles Amendment Act 1979 Part I;

(h) to provide that a unit styled a Balance Unit may be subdividedby a new unit plan without the consent of the proprietors ofexisting units;

(i) to make provision for unit title schemes to be subject toheritage and like covenants;

(j) to reduce in certain small developments the 80 per centthreshold laid down by section 42 and enacting a guidelineto the exercise of the discretion under that section;

(k) to make express provision for a sinking fund;

(l) to transfer jurisdiction under sections 42 and 43 to the DistrictCourt;

(m) to amend the “all the land in one title” provision insection 5(1)(b) to exclude interests in jointly owned accesslots; and

(n) to provide as a new section 4(3B) that notwithstandingsection 4(3) an easement appurtenant to any unit or thecommon property may be surrendered or varied with theconsent of every proprietor and every mortgagee of all theunits in the development.

A17 There should be provisions governing the maintenance and repairof access lots.

SUMMARY OF RECOMMENDATIONS


A P P E N D I X B

D r a f t S h a r e d O w n e r s h i p o fL a n d A c t 2 0 0 –

TABLE OF PROVISIONS

1 Short Title and commencement

Part 1Amendments to Land

Transfer Act 1952

2 Part to be part of Land TransferAct 1952

3 New Part inserted

Part VIIBProhbition and Conversion

of Cross-Leases

121Q Meaning of cross-lease121R Prohibition on dealing

with cross-leases121S Voluntary conversion of

cross-leases121T What applications under

section 121S mustcontain

121U Incidental rights121V Variation, etc of

incidental rights121W Notification of

conversion of cross-leaseto subdivision

121X Consent for conversion4 Fees

Part 2Amendments to Property

Law Act 1952

5 Part to be part of Property LawAct 1952

6 New sections inserted126H Rights implied in respect

of access lots126I Jurisdiction of Court in

respect of access lots

Part 3Amendments to Unit

Titles Act 1972

7 Part to be part of Unit TitlesAct 1972

8 Interpretation9 Subdivision of land into units10 Subdivision effected when plan

deposited11 Restrictions on deposit of plan12 Units including open space13 Unit entitlement14 Issue of certificate of title in

respect of unit15 Heritage covenants and other

similar covenants16 Body corporate not required in

certain cases17 Duties of body corporate18 Certificate of proprietor’s

liability to be produced toRegistrar

19 Registration of transfers ofcommon property

20 Additions to common property21 Recovery of contributions from

first mortgagee

37

22 Certificate of proprietor’s liability23 Rules24 Relief in cases where

unanimous resolution required25 Relief for minority26 Redevelopment27 Minor adjustments to units28 New sections inserted

45A Proprietors may agree ondifferent basis fordetermining shares inestates

45B Subdivision of land oncancellation of plan incertain cases

29 Cancellation of plan followingdecision of Court

30 Application and interpretationof this Part

31 Effect of deposit of unit plan32 Second Schedule amended33 Repeal of Part I of Unit Titles

Amendment Act 1979

Part 4Amendments to Resource

Management Act 1991

34 Part to be part of ResourceManagement Act 1991

35 Interpretation36 Meaning of “subdivision of

land”37 Prohibition on subdivision by

way of cross lease or companylease

38 Information to accompanyapplications for subdivisionconsents

39 Restrictions upon deposit ofsurvey plan

40 Cancellation of prior approvals41 Approval of survey plans when

esplanade reserve or esplanadestrips required

42 Transitional and savingprovisions

A BILL INTITULED

An Act to reform the law relating to the shared ownership of land

BE IT ENACTED by the Parliament of New Zealand as follows:

DRAFT STATUTE AND COMMENTARY


1 Short Title and commencementThis Act may be cited as the Shared Ownership of Land Act 200–.

PART 1AMENDMENTS TO LAND TRANSFER ACT 1952

2 Part to be part of Land Transfer Act 1952(1) This Part is part of the Land Transfer Act 1952 (in this Part referred

to as the principal Act).(2) Except for section 121R, this Part comes into force on the day after

the date on which this Act receives the Royal assent.

s 1 SHARED OWNERSHIP OF LAND

39

COMMENTARY

Section 1

C1 The bill has been drafted on the premise that it will be subdividedinto separate bills during its passage through Parliament.



3 New Part insertedThe principal Act is amended by inserting, after Part VIIA, thefollowing Part:

“PART VIIB“PROHIBITION AND CONVERSION OF CROSS-LEASES

“121Q Meaning of cross-lease“For the purposes of this Part, a cross-lease means a lease of abuilding or part of a building on, or to be erected on, any land“(a) that is granted by the registered proprietor of the land;

and“(b) that is held by a person who is a registered proprietor of an

estate or interest in an undivided share in the land.

“121R Prohibition on dealing with cross-leases“(1) No Registrar may register an instrument purporting to transfer

or otherwise deal with any estate or interest in land if that landis subject to a cross-lease, or the cross-lease itself.

“(2) Subsection (1) does not apply to“(a) a transmission; or“(b) a vesting order under section 99; or“(c) the vesting of an estate or interest under section 99A; or“(b) an application under section 121S.

“(3) This section comes into force on a date to be appointed by theGovernor-General by Order in Council but that date is not tobe earlier than 10 years after the commencement of this Act.


41

Section 3

C2 Section 121Q. This section defines the term “cross-lease” whichis not a legal term of art.

C3 Section 121R. The effect of this section is to forbid the registrationafter a mandatory conversion date of any dealing affecting thetitle of a cross-lease owner other than a transmission, a vestingorder, or a conversion application under section 121S . Themandatory conversion date would be fixed by Order in Counciland must be no sooner than 10 years after the commencement ofthe Act.



“121S Voluntary conversion of cross-leases“(1) On the application of all registered proprietors of a parcel of

land that is subject to a cross-lease, the Registrar may cancel allcertificates of title for that land and issue new certificates oftitle that effect a subdivision of that land, as defined in section218(1) of the Resource Management Act 1991, into the partsspecified in the application.

“(2) In every case, the new certificates of title are subject to allencumbrances, liens, and interests (other than any lease of thekind referred to in section 121Q) to which the prior certificatesof title and leases were subject immediately before those titlesand leases were cancelled.

“(3) When the Registrar issues the new certificates of title, theRegistrar must enter on each new certificate of title, allencumbrances, liens, and interests as specified in subsection (2)so as to preserve their registered priority.

“(4) No Registrar may refuse to grant an application simply becausethe territorial authority has not granted a subdivision consentto the registered proprietors for the land.

“(5) Except for the registered proprietors, no consent to anapplication under this section is required from any other person.

“121T What applications under section 121S must contain“(1) Every application under section 121S must

“(a) relate to the whole of the parcel of land; and“(b) specify the easements, incidental rights, and any restrictive

covenants to which the registered proprietors have agreedwith respect to the parcel of land, or specify that section121U applies; and

“(c) be accompanied by a plan of the kind referred to in section167(1) or any other plan that the Registrar requires underthat section.

“(2) To avoid any doubt,“(a) the prior permission of the territorial authority under

section 348 of the Local Government Act 1974 is notrequired for any rights of way specified in an applicationunder section 121S; and

“(b) a survey plan under the Resource Management Act 1991is not required for the purposes of that application.


43

Sect ion 3 commentary cont inued

C4 Section 121S. This section provides that the procedure forconversion from cross-lease to subdivision is by application tothe Registrar (subsection 1). Subsections (2) and (3) are concernedwith bringing down encumbrances on to the new titles. Subsections(4) and (5) make it clear that no consents (whether from territoriallocal authorities, encumbrancers or head lessees) are requiredother than those of the registered proprietors.

C5 Section 121T. This section particularises the contents of asection 121S application. It must relate to the whole parcel ofland, and specify any easements, or restrictive covenants, andwhether section 121U applies. There must be a Land Transfer Plandefining the boundaries of the new lots. Subsection 3 makes itclear that the consent of the territorial local authority is notrequired to any right of way and that any requirement under theResource Management Act 1991 of a survey plan does not apply.



“121U Incidental rights“(1) This section applies if the registered proprietors, in an

application under section 121S, specify that it applies.“(2) The land to which the application relates is subject to and has

appurtenant to it the following rights as are necessary for thereasonable use or enjoyment of that land:“(a) rights of support, shelter, and protection; and“(b) rights for the passage or provision of water, sewerage,

drainage, gas, electricity, oil, garbage, air, telephone, radio,and television services, and all other services of any natureover every part of the land; and

“(c) rights for the registered proprietors, their servants, tenants,agents, licensees and invitees at all times by day and nightto go or pass with or without vehicles, machinery, andimplements of any kind over parts of the land commonlyused for those purposes.

“(3) The land to which the application relates is subject to and hasappurtenant to it“(a) a right to the full, free, and uninterrupted access and use

of light to or for any windows, doors, or other aperturesexisting at the date of the application and enjoyed at thatdate; and

“(b) a right to maintain overhanging eaves existing at the dateof the application.

“(4) The rights created by this section carry with them all ancillaryrights necessary to make them effective as if they were easements.

“(5) This section does not affect any land other than the land towhich the application relates.

“(6) To avoid any doubt, the prior permission of the territorialauthority under section 348 of the Local Government Act 1974is not required for any rights of way created by this section.

“(7) The Registrar must enter on each new certificate of title issuedunder section 121S, a memorandum that the land is subject toand has appurtenant to it, the rights created by this section.

“121V Variation, etc of incidental rights“(1) The rights referred to in section 121U may be varied, negatived,

added to, or surrendered as if they were an easement registeredunder this Act.

“(2) Sections 9OE and 9OF apply, with the necessary modifications,to the variation, negativing, addition, or surrender of thoserights, as the case may be.


45


C6 Section 121U. This provision is intended to avoid the need toparticularise easements and like rights. It is based on a comparableprovision in the Unit Titles Act 1972 section 11. The requirementof notification on the title contained in subsection 7 is foundedon a comparable provision in the Local Government Act 1974section 461.

C7 Section 121V. This section would provide machinery for theextinguishing or varying of section 121U rights.



“121W Notification of conversion of cross-lease to subdivision“(1) Subject to subsection (2), every registered proprietor who is

issued with a new certificate of title under section 121S must,within 1 month after the date that the new certificate of title isissued, give written notice of the new certificate of title to theterritorial authority in whose district the land is situated.

“(2) If a solicitor or other authorised agent acted on behalf of theregistered proprietor in relation to the new certificate of title,that solicitor or agent must give the notice referred to insubsection (1) to the territorial authority.

“121X Consent for conversion“(1) Subject to subsection (2), if a person’s consent is required for

an application under section 121S, and that person is dead orcannot be found or refuses to consent or does not consent withina reasonable time, or if for any reason it is impracticable to obtainthe consent of that person, a District Court, on the applicationof any applicant under that section, may if the Court thinks fitconsent on behalf of that person to the application.

“(2) If an application is made under this section before section 121Rcomes into force, the District Court must have regard to thefinancial circumstances of any person who has refused to consentto the application under section 121S.

“(3) If the District Court makes an order under this section, the Courtmay impose such conditions as it thinks fit.

“(4) In any case where the District Court consents, it may, by thesame or any subsequent order, require any person having thecustody or control of any certificate of title or instrument toproduce it to the Registrar to dispense with the production of it.”

4 FeesSection 235 of the principal Act is amended by inserting, aftersubsection (1), the following subsection:“(1A) Despite subsection (1), no regulations made under this Act

may prescribe fees in respect of“(a) an application under section 121S; or“(b) the approval of a plan referred to in section 121T(c).”


47


C8 Section 121W. This section, analogously to the Rating Powers Act1988 section 106, provides for notification of the change ofownership to the territorial local authority.

C9 Section 121X is concerned with the situation where the registeredproprietors are not in agreement. A District Court may providethe necessary consent. The Court may impose conditions. If theapplication is made before the mandatory conversion date, theCourt must take into account the financial circumstances of adissentient.

Section 4

C10 Section 235(1)(A). This new subsection would proscribe thecharging of registration fees in relation to section 125S applications.



PART 2AMENDMENTS TO PROPERTY LAW ACT 1952

5 Part to be part of Property Law Act 1952This Part is part of the Property Law Act 1952 (in this Part referredto as the principal Act).

6 New sections insertedThe principal Act is amended by inserting, after section 126G, thefollowing sections:

“126H Rights implied in respect of access lots“(1) Where an access lot includes a driveway, or a proposed driveway,

a proprietor of the access lot is entitled“(a) to a reasonable contribution from the other proprietors

towards the cost of establishing, maintaining, upkeeping,and repairing the driveway to an appropriate standard; and

“(b) to recover from the other proprietors, the costs of repairsto the driveway caused by any wilful or negligent act, andany other costs caused by those other proprietors, theirservants, contractors, permitted occupants, residents, orinvitees that arise out of the use of the driveway.

“(2) For the purposes of this section,access lot, in relation to a subdivision, means a separate allotmentin the subdivision created for the purpose of providing accessfrom any of the allotments of the subdivision to an existing roador street.proprietor, in relation to an access lot, means the registeredproprietor of each allotment which the access lot serves and whoowns a share in the access strip.

“126I Jurisdiction of Court in respect of access lotsSection 126F (other than subsections (1)(a), (1)(b), and (3))applies in respect of an access lot that comprises a driveway, ora proposed driveway, under section 126H and any references insection 126F to“(a) a covenant or an easement or both are to be read as

references to an access lot; and“(b) work are to be read as references to establishing,

maintaining, upkeeping, or repairing the driveway, as thecase may be.”


49

Section 6

C11 These sections provide for the sharing of the cost of repairingand maintaining shared access lots analogously to existing statutoryprovisions relating to reciprocal rights of way (see Part 4 of thisReport).



PART 3AMENDMENTS TO UNIT TITLES ACT 1972

7 Part to be part of Unit Titles Act 1972This Part is part of the Unit Titles Act 1972 (in this Part referred toas the principal Act).

8 InterpretationSection 2 of the principal Act is amended by inserting, after thedefinition of the term “accessory unit”, the following definition:“balance unit means a unit that is proposed to be developed orsubdivided into 1 or more units (with or without common property)at a later stage and that is shown on the unit plan as a balance unit:”.

9 Subdivision of land into unitsSection 3(1) of the principal Act is amended by inserting, afterparagraph (aa), the following paragraph:“(ab) if the registered proprietor so wishes, a balance unit; and”.

10 Subdivision effected when plan depositedSection 4 of the principal Act is amended by inserting, aftersubsection (3A), the following subsection:“(3B) Despite subsection (3), an easement appurtenant to any unit

or the common property may be surrendered or varied butonly with the consent of every proprietor and every mortgageeof all the other units comprising the development.”

11 Restrictions on deposit of planSection 5 of the principal Act is amended by inserting, aftersubsection (1), the following subsection:“(1A) Subsection (1)(b) does not prevent the deposit of a plan in

any case where the land to which the plan relates is held inmore than one certificate of title because it includes a jointlyowned access lot.”

12 Units including open spaceThe principal Act is amended by inserting, after section 5A, thefollowing section:“(5B) Despite sections 5(1)(g) and 5A(1)(a), nothing in this Act or

the Resource Management Act 1991 prevents the deposit ofa unit plan where the boundaries of a principal unit shownon the unit plan are not bounded by a building or the earth’ssurface, and that principal unit may be wholly comprised ofopen space.”


51

Section 8

C12 The definition of a balance unit is required as part of the newmore flexible provisions for staged developments.

Section 9

C13 This change is necessitated as part of the new procedure for stageddevelopments.

Section 10

C14 This section would alter the existing law by permitting thesurrender or variation with the consent of all proprietors andmortgagees of easements appurtenant to any unit or to the commonproperty.

Section 11

C15 This section would repair the oversight referred to in paragraph 61of this Report.

Section 12

C16 The proposed section would make it clear that a principal unitmay consist solely of air space and need not be bounded by abuilding or the earth’s surface.



13 Unit entitlementSection 6 of the principal Act is amended by repealing subsections(1) and (2), and substituting the following subsections:“(1) For the purpose of determining the matters specified in

subsection (3), before the unit plan is deposited, a unitentitlement must be assigned to every principal unit, accessoryunit, and balance unit.

“(2) No change may be made in the unit entitlement of any unitafter the unit plan is deposited unless

“(a) section 19(5)(d) or section 44(3) applies; or“(b) the body corporate agrees by unanimous resolution, to add new

rules to those set out in the Second Schedule that fix or statethe manner in which the body corporate must fix the unitentitlement.”

14 Issue of certificate of title in respect of unitSection 8 of the principal Act is amended by repealing subsection(2), and substituting the following subsection:“(2) Despite subsection (1)(a), the Registrar may, at the request of

the registered proprietor,“(a) issue a separate certificate of title for any principal unit,

which certificate of title may include also 1 or moreaccessory units:

“(b) issue a separate certificate of title for a balance unit.”

15 Heritage covenants and other similar covenantsThe principal Act is amended by inserting, after section 11, thefollowing section:“11A If any of the following covenants or agreements are entered

into in respect of a unit or land to which a unit plan relates,they are to be treated as an easement for the purposes of sections4(3A), 4(3B), 7(1), 9(3), and 17 of this Act:“(a) a heritage covenant under section 6 of the Historic Places

Act 1993:“(b) an open space covenant under section 22 of the Queen

Elizabeth The Second National Trust Act 1977:“(c) an agreement for private protected land under section 76

of the Reserves Act 1977:“(d) a conservation covenant under section 7 of the Reserves

Act 1977.”

s 1 3 SHARED OWNERSHIP OF LAND

53

Section 13

C17 This section would change the existing law by removing therequirement that unit entitlement be fixed by valuation and bymaking a provision for changing unit entitlement.

Section 14

C18 The change to the existing subsection is needed as part of thenew procedure for staged developments.

Section 15

C19 The proposed new section would make provision for heritagecovenants and the like.



16 Body corporate not required in certain casesThe principal Act is amended by inserting, after section 12, thefollowing section:

“12A(1) Section 12 does not apply if“(a) there are no more than 6 principal units shown on the

unit plan; and“(b) the common property comprised in the unit plan consists

entirely of a driveway or a party wall or both; and“(c) either

“(i) before the deposit of the plan, all the registeredproprietors of the land to which the plan relates electto dispense with the requirement for a body corporate;or

“(ii) after the deposit of the unit plan, the proprietors ofall the units comprised in the plan elect to dissolvethe body corporate.

“(2) If an election is made under subsection (1)(c)“(a) the registered proprietors of the land to which the unit

plan relates are the proprietors of all the units comprisedin the unit plan, and all other assets of the body corporate,as tenants in common in shares proportional to the unitentitlement in respect of their respective units; and

“(b) sections 13, 16, 17, 36, 37, 41 to 43, 50, 51, and 54 do notapply; and

“(c) sections 14, 15, 19, 20, 23, 26, 28, 32 to 34A, 38, 40, and44 to 49 apply, with the necessary modifications, as ifreferences in those sections to the body corporate werereferences to the registered proprietors.

“(3) No election under subsection (1) has effect until“(a) the registered proprietors have lodged a notification of the

election and an accompanying declaration with theRegistrar; and

“(b) the Registrar has entered on the supplementary recordsheet an appropriate memorial relating to the election.

“(4) The declaration must state that the election has been duly madeand that the body corporate has no liabilities or assets otherthan“(a) the common property shown on the unit plan; and“(b) the common property that is not shown on the unit plan

but which“(i) consists of air space; or“(ii) is below ground; or“(iii)is common property by virtue of regulation 41(6) of

the Survey Regulations 1972.“(5) The body corporate is to be treated as having been

dissolved on the date the Registrar enters a memorialrecording the election on the supplementary record sheet.


55

Section 16

C20 The proposed new section would give effect to the proposals inthis report for dispensing with a body corporate in appropriatecircumstances.



“(6) For the purposes of this sectiondriveway means that part of the common property where theproprietors, and their servants, tenants, agents, licensees, andinvitees at all times by day and night are permitted to go or passwith or without vehicles, machinery, and implements of any kind:party wall means a wall that separates 2 or more units.”

17 Duties of body corporate(1) Section 15(1)(f) of the principal Act is amended by adding the words

“, and provide for the deferred maintenance of the common propertyand any replacement items”.

(2) Section 15(2)(a) of the principal Act is amended by inserting, afterthe words “common property,” the words “and for any deferredmaintenance or replacement items,”.

(3) Section 15 of the principal Act is amended by inserting, aftersubsection (2), the following subsections:“(2A) Despite subsection (2)(c), the body corporate may raise

amounts for the expenditures referred to in subsection (2)(a),in the following way:“(a) if the expenditure is substantially for the benefit of 1 unit

only, by levying a contribution on the proprietor of thatunit:

“(b) if the expenditure is substantially for the benefit of someof the units only, by levying contributions on theproprietors of those units rateably according to their unitentitlements:

“(c) if the expenditure benefits 1 or more of the unitssubstantially more than it benefits the others or other ofthem, by levying contributions on the proprietors of thoseunits in such shares as it thinks fit having regard to therelative benefits of those units.

“(2B) Despite subsection (1)(b), if the rules of the body corporateallow the body corporate to elect not to insure and keep insuredany such building and the body corporate has unanimously soresolved, the body corporate is not required to insure and keepinsured any building on the land that is a stand-alone buildingcontained in a unit space.”

18 Certificate of proprietor’s liability to be produced to RegistrarThe principal Act is amended by inserting, after section 16, thefollowing section:“16A No Registrar may enter a memorial on a certificate of title

issued under this Act if“(a) the memorial relates to a mortgage, charge, transfer, or

other dealing affecting the title; and“(b) a certificate under section 36 was not included with that

mortgage, charge, transfer, or other dealing when theinstrument was presented for registration.”


57

Section 17

C21 The proposed new subsections would modify in certain respectsthe duties of bodies corporate. Subsections (1) and (2) are intendedto remove any doubts as to the power of a body corporate to createa sinking fund. Subsection (3) permits differing levies to reflectthe benefit from proposed expenditure and authorises a bodycorporate not to insure a stand-alone unit if all unit proprietorsagree.

Section 18

C22 The proposed section would prohibit a Registrar from registeringcertain transactions without production of a section 36 certificate.



19 Registration of transfers of common propertySection 18 of the principal Act is amended by adding the followingparagraphs:“(6) A transfer need not be accompanied by a new unit plan under

subsection (1) if, because of the nature of the common propertybeing transferred, the Registrar after consultation with the ChiefSurveyor under the Survey Act 1986 is of the view that a newunit plan is not required.

“(7) If subsection (6) applies, subsections (3) to (5) apply, with thenecessary modifications, as if the reference to a new unit planwas a reference to a unit plan.

“(8) To avoid any doubt, the Registrar may register a transfer towhich subsection (6) applies by causing an appropriatememorial relating to the transfer to be noted on thesupplementary record sheet.”

20 Additions to common propertySection 19 of the principal Act is amended by adding the followingsubsections:“(7) A transfer need not be accompanied by a new unit plan under

subsection (3) if, because of the nature of the land or unit beingtransferred, the Registrar after consultation with the ChiefSurveyor under the Survey Act 1986 is of the view that a newunit plan is not required.

“(8) If subsection (7) applies, subsections (3) to (5) apply, with thenecessary modifications, as if the reference to a new unit planwas a reference to a unit plan.

“(9) To avoid any doubt, the Registrar may register a transfer towhich subsection (7) applies by causing an appropriatememorial relating to the transfer to be noted on thesupplementary record sheet.”

21 Recovery of contributions from first mortgageeThe principal Act is amended by inserting, after section 32, thefollowing section:“32A(1) If a proprietor defaults in the payment of a contribution

levied under section 15(2)(c) or section 15(2A), the bodycorporate may recover that amount from any person whois a first mortgagee of the unit in respect of which theamount is payable.

“(2) If a first mortgagee pays a contribution under subsection(1), the amount so paid, until it is repaid to the mortgagee,must be treated as forming part of the money secured bythe mortgage and bears interest at the same rate, or, if themortgagee so decides, is recoverable by him or her fromthe mortgagor or proprietor.”


59

Sections 19 and 20

C23 These proposed sections are intended to permit adjustment tothe boundaries of common property without a new unit plan ifthe Registrar so agrees.

Section 21

C24 The proposed section would make a first mortgagee liable forbody corporate levies in the same way as a first mortgagee currentlyis for rates under the Rating Powers Act 1988 section 139.



22 Certificate of proprietor’s liabilitySection 36 of the principal Act is amended by adding the followingsubsection:“(2) The body corporate may refuse to provide a certificate under

subsection (1) in respect of a proprietor if there are moneysdue from that proprietor to the body corporate and thosemoneys are unpaid.”

23 RulesSection 37 of the principal Act is amended by inserting, aftersubsection (5), the following subsection:“(5A) Subsection (5) does not apply if rules are added, as referred

to in section 6(2)(b), that fix or state the manner in whichthe body corporate must fix the unit entitlement.”


61

Section 22

C25 This proposed provision should be read with section 18. Togetherthey are designed to assist a body corporate to recover moneysoutstanding from defaulting unit proprietors by requiring asection 36 certificate (which may be withheld if there are moneysdue but unpaid) to be provided to a Registrar on registering certaintransactions.

Section 23

C26 This new section is part of the procedure proposed for varyingunit entitlements.



24 Relief in cases where unanimous resolution requiredThe principal Act is amended by repealing section 42, andsubstituting the following section:

“42(1) This section applies if“(a) under this Act or rules under this Act, a unanimous

resolution or the consent of all the proprietors is necessarybefore any act is done; and

“(b) that resolution or consent is not obtained; but“(c) either,

“(i) where there are only 2 principal units, the proprietorof 1 of those units supports the resolution or act; or

“(ii) in any other case, two-thirds of those entitled to voteon a poll support the resolution or act.

“(2) Any proprietor or proprietors supporting the resolution or act,may apply to a District Court to have the resolution as supportedor the consensus as obtained declared sufficient.

“(3) A District Court may not make an order under this section unlessit is satisfied that to do so would not diminish the value of orunreasonably interfere with the use or enjoyment of the unit ofa proprietor who opposes the application.

“(4) If the District Court so orders, the resolution is to be treated ashaving been passed unanimously or the consent of all theproprietors as having been obtained, as the case may be.”

25 Relief for minoritySection 43 of the principal Act is amended(a) by omitting the words “to the Court” and substituting the words

“to a District Court”; and(b) by omitting the words “if the Court” and substituting the words

“if the District Court”.


63

Section 24

C27 The proposed new section would replace the present section 42.The substantive changes effected by the new section are to transferjurisdiction from the High Court to the District Court, to imposeby the proposed subsection (3) a test governing the court’s exerciseof its jurisdiction and to lower the proportion of supporters neededto allow the section to be invoked.

Section 25

C28 This section would transfer jurisdiction under section 43 from theHigh Court to the District Court.



26 Redevelopment(1) Section 44(2)(c) of the principal Act is amended by adding the words

“, and whether or not there remains a balance unit:”.(2) Section 44(2)(d) of the principal Act is amended by omitting the

words “, which apportionment shall be determined by a registeredvaluer within the meaning of the Valuers Act 1948, subject topayment to the valuer of such fee as he may fix”.

(3) Section 44 of the principal Act is amended by repealing subsection(3), and substituting the following subsections:“(3) Where a redevelopment involves the inclusion in a unit of

part of the common property or the erection of 1 or moreunits on the common property, the unit entitlements of allunits that will be on the land to which the plan ofredevelopment relates must be reassessed, and a new unitentitlement must be assigned to every such unit at the dateon which the reassessment is made.

“(3A) Despite subsection (3), a reassessment may be made as at thedate the current unit entitlements were made if thedevelopment is of a relatively minor nature.”

(4) The principal Act is amended by inserting after subsection (4), thefollowing subsection:“(4A) Subsection (4) does not apply in any case where the plan of

redevelopment only relates to the subdivision of a balanceunit.”

27 Minor adjustments to unitsThe principal Act is amended by inserting, after section 44, thefollowing section:

“44A(1) If the proprietors of 2 or more units wish to adjust the situationof the boundary separating their units, the proprietors mayapply to the Registrar for a memorial to be noted on therelevant certificates of title and for a memorial to be enteredon the supplementary record sheet noting the adjustment.

“(2) An application need not be accompanied by a plan ofredevelopment if, because of the nature of the adjustment,the Registrar is of the view that a plan of redevelopment isnot required.

“(3) Before an adjustment is noted under subsection (1), thefollowing persons must give written consent to theadjustment:“(a) every proprietor who is affected by the adjustment; and“(b) every mortgagee and caveator (being a caveator

whose caveat was lodged with the Registrar beforethe application for the adjustment was made) who isaffected by the adjustment.

“(4) To avoid any doubt, this section does not apply to anadjustment to the boundaries of the common property.”


65

Section 26

C29 The proposed amendments contain the rest of the statutory changesneeded by the substituted procedure for staged development.

Section 27

C30 The proposed section provides a new procedure for adjustmentof boundaries between principal units.



28 New sections insertedThe principal Act is amended by inserting, after section 45, thefollowing sections:

“45A Proprietors may agree on a different basis for determining sharesin estates(1) If all the proprietors apply under section 45 to the Registrar

to cancel the unit plan, sections 45(5)(a) and 45(5)(b) donot apply if all those proprietors determined, by unanimousresolution, before the cancellation of the unit plan to vestthe estates referred to in section 45(5) on a different basisfrom that relating to their unit entitlements as referred toin section 9.

“(2) If subsection (1) applies, on the cancellation of the unit plan,“(a) the estates referred to in sections 45(5)(a) and 45(5)(b)

vest in the persons who were the proprietors of the unitsimmediately before the cancellation of the unit planon the basis determined by those proprietors; and

“(b) the estate referred to in section 45(5)(b) merges withthe estate referred to in paragraph (a).

“(3) To avoid any doubt, the proprietors may, under section45(7), determine by unanimous resolution, before thecancellation of the unit plan, that any property and moneyof the body corporate be distributed on a different basisfrom that relating to their unit entitlements.

“45BSubdivision of land on cancellation of plan in certain cases“(1) If

“(a) the proprietors of all the units shown on a unit planapply under section 45 for the cancellation of the unitplan; and

“(b) there are no more than 6 principal units shown on theunit plan; and

“(c) the common property comprised in the unit planconsists entirely of a driveway or a party wall or bothwithin the meaning of section 12A(6); and

“(d) the proprietors also apply for a subdivision of the land(as defined in section 218 of the Resource ManagementAct 1991) to which the unit plan relates; and

“(e) the application is accompanied by a plan of the kindreferred to in section 167(1) or any other plan that theRegistrar requires under that section,

the Registrar may cancel the unit plan, and instead ofcomplying with sections 45(5)(a), 45(5)(b), and 45(6),issue new certificates of title that effect a subdivision ofthe land into the parts specified in the application.

“(2) No Registrar may refuse to grant an application undersubsection (1) simply because the territorial authority hasnot granted a subdivision consent to the proprietors of allthe units.

“(3) To avoid any doubt, a survey plan under the ResourceManagement Act 1991 is not required for the purposes ofthe application.”


67

Section 28

C31 As part of the proposed new flexibility in fixing share entitlements,this section and section 29 permit parties on cancellation of aunit plan to agree among themselves as to new unit entitlements.



29 Cancellation of plan following decision of CourtSection 47 of the principal Act is amended by adding the followingsubsection:“(5) Section 45A applies when an application is made to the

Registrar under this section.”


69DRAFT STATUTE AND COMMENTARY

Section 29

C32 As part of the proposed new flexibility in fixing share entitlements,this section and section 28 permit parties on cancellation of aunit plan to agree among themselves as to new unit entitlements.


30 Application and interpretation of this PartSection 56(2) of the principal Act is amended by inserting, afterthe definition of the term “company”, the following definition:“Court means a District Court:”.

31 Effect of deposit of unit planSection 64(3) of the principal Act is amended by adding thefollowing paragraph:“(g) despite section 21, if the unit plan relates to an estate as lessee

or licensee in any land, section 27 does not apply to the lessoror proprietor of any unit.”

32 Second Schedule amendedClause 3 of the Second Schedule of the principal Act is amended byadding the following paragraph:“(f) on a unanimous resolution, elect not to insure or keep insured

any building on the land that is a stand-alone buildingcontained in a unit space.”

33 Repeal of Part I of Unit Titles Amendment Act 1979(1) Part I of the Unit Titles Amendment Act 1979 is repealed.(2) Despite subsection (1), if a proposed unit development plan has been

deposited in accordance with section 5 of the Unit TitlesAmendment Act 1979 before this Act comes into force, Part I ofthe Unit Titles Amendment Act 1979 continues in force for thepurposes of effecting, in stages, the subdivision to which the planrelates as if that Part had not been repealed.

PART 4AMENDMENTS TO RESOURCE MANAGEMENT ACT 1991

34 Part to be part of Resource Management Act 1991This Part is part of the Resource Management Act 1991 (in thisPart referred to as the principal Act).


71

Section 30

C33 This section confers on a District Court the powers conferredunder Part IV relating to the conversion of existing schemes.

Section 31

C34 Under the proposed paragraph, section 27 would not apply followinga conversion where the underlying title is leasehold.

Section 32

C35 This is a machinery provision, part of the new exemption fromthe requirement to insure stand-alone buildings where allproprietors agree.

Section 33

C36 The new procedure for staged development permits the repeal ofPart 1 of the Unit Titles Amendment Act 1979 except for partlycompleted staged subdivisions.



35 InterpretationSection 2(1) of the principal Act is amended by omitting thedefinition of the term “survey plan”, and substituting the followingdefinition:“survey plan means a plan of subdivision of land, or a building orpart of a building, prepared in a form suitable for deposit under theLand Transfer Act 1952 or with the Registrar of Deeds; and anyCrown plan prepared for a similar purpose as the case requires, andincludes a unit plan:”.

36 Meaning of “subdivision of land”(1) Section 218(1)(a) of the principal Act is amended by repealing

subparagraph (iv).(2) Section 218(2) of the principal Act is amended by repealing

paragraph (b), and substituting the following subsection:“(b) any parcel of land or building or part of a building that is shown

or identified separately on a survey plan; or”.

37 Prohibition on subdivision by way of cross-lease or company leaseThe principal Act is amended by inserting, after section 218, thefollowing section:

“218A(1) No person may grant a cross-lease or company lease inrespect of any part of an allotment.

“(2) No survey plan may be deposited under the Land TransferAct 1952 or with the Registrar of Deeds for the purposesof section 11(1)(a) if the survey plan is to enable the grantof a cross-lease or company lease.

“(3) Despite section 226, no Registrar may issue a certificate oftitle for any land that is shown as a separate allotment ona survey plan (being a certificate issued to give effect tothe subdivision shown on that survey plan) if the surveyplan is to enable the grant of a cross-lease or company lease.

“(4) For the purposes of this section, the terms cross-lease andcompany lease include a memorandum of cross-lease orcompany lease in renewal or in substitution for a cross-lease or company lease.”


73

Sections 35 and 36

C37 These provisions would exclude references to cross-leases andcompany leases from the current definitions of survey plan andsubdivision of land.

Section 37

C38 The proposed new section forbids cross-leases and company leases.



38 Information to accompany applications for subdivision consentsSection 219(b) of the principal Act is amended by omitting the words“by the grant of a cross-lease or company lease or”.

39 Restrictions upon deposit of survey planSection 224 of the principal Act is amended by repealing paragraph(f), and substituting the following paragraph:“(f) In the case of a subdivision of land to be effected by the deposit

of a unit plan, the territorial authority is satisfied on reasonablegrounds that every existing building or part of an existingbuilding (including any building or part of the building underconstruction) to which the unit title plan relates complies with,or will comply with, the provisions of the building code specifiedin section 46(4) of the Building Act 1991, and a certificateauthenticated by the territorial authority under section 252 ofthe Local Government Act 1974 is lodged with the Registraror Registrar of Deeds, as the case may require; and”.

40 Cancellation of prior approvalsSection 227(2) of the principal Act is amended by omitting the words“, or a cross-lease or company lease”.

41 Approval of survey plans when esplanade reserve or esplanadestrips requiredSection 237(3)(a) of the principal Act is amended by omitting thewords “the grant of a cross-lease or company lease or by”.

42 Transitional and saving provisions(1) If a subdivision consent has been granted in respect of the division

of an allotment by way of a company lease or cross-lease before thisAct comes into force, section 218A does not apply, and sections2(1), 218, 219, 224, 227, and 237 apply for the purpose of effectingthe subdivision as if those sections had not been amended by thisAct.

(2) If(a) a person wishes to divide an allotment by way of the grant a

cross-lease; and(b) the allotment comprises an estate in leasehold; and(c) the term of the cross-lease does not exceed the term of the

leasehold referred to in paragraph (b),then section 218A does not apply, and sections 2(1), 218, 219, 224,227, and 237 apply in respect of the allotment as if those sectionshad not been amended by this Act.


75

Sections 38 to 41

C39 These proposed provisions would delete unnecessary referencesto cross-leases and company leases.

Section 42

C40 This transitional provision permits renewals of cross-leases wherethe underlying title is a renewable lease and the term of the cross-lease has necessarily been fixed at a period shorter than that ofthe headlease.



A P P E N D I X C

L i s t o f s u b m i t t e r s

Auckland City Council

Auckland District Law Society’s Property and Business LawCommittee

Clinton Baker

RW Bell-Booth

RS Bezar

IS Cameron

JTK Carroll

Miles Cooper

Daphne Downs (Taupo)

Dyson Smythe & Gladwell

Eco-Village and Cohousing Association of New Zealand

JD Edwards (Turangi)

DJ Fitzgerald

Brian Fitzpatrick

John Gellert

ML Graham

Grey Power Taupo District

GM Gunman

Housing New Zealand

Land Information New Zealand

Local Government New Zealand

RBG Mahon

Ross Miller

New Zealand Institute of Conveyancers Incorporated

New Zealand Institute of Surveyors

New Zealand Law Society’s Property Law and General PracticeCommittee

77

New Zealand Planning Institute

John Newman

Ewan Price

Property and Land Economy Institute of New Zealand Inc

Purnell Creighton McGowan

Quadrant Properties Limited

Justice Randerson

Real Estate Institute of New Zealand Incorporated

Larry Richards

LH Stent (Taupo)

Murray and Esther Turner (Taupo)

Waitakere Eco Neighbourhood Cohousing Project

Waterfront Residents Association

Alan Webb (Taupo)

IM Whittle (Taupo)

R Wratten (Taupo)

MB and LM Worthington

Yuet Fah Wu

L I S T O F S U B M I T T E R S


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79

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Shared ownership of land - Legal Information Institute · Dealings in common property 43 21 ... 7...

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Transcript of Shared ownership of land - Legal Information Institute · Dealings in common property 43 21 ... 7...